With borrowing of funds forming an integral part of commercial vehicle purchases, Ashok Leyland has revived its plan to have a captive finance arm. It has floated a non-banking finance company (NBFC) Hinduja Leyland Finance to provide affordable loans to truck buyers.

K Sridharan, chief financial officer, Ashok Leyland, said the company is awaiting clearance from the Reserve Bank of India and is hoping to finalise business plans over the next three months.

He said the proposed NBFC arm could finance at least 10-15 of the company's total truck sales. The NBFC will have a paid-up capital of more than Rs 100 crore. It will see investments into equity by Ashok Leyland and other Hinduja Group firms. The capital structure and other details are being worked out.

“In segments such as passenger cars, some percentage of purchases could happen through own funds. But in the case of commercial vehicles (CVs), almost 99 per cent of the sales would be done through loans from financiers – that range from organised sectors such as banks as well as NBFCs and other lenders," said Sridharan.

"Hence borrowing is an integral part of the demand for CVs and with that interest rates also has an important place.”

Ashok Leyland is a commercial vehicle manufacturing company based in Chennai, India. It is the second largest commercial vehicle company in India in the medium and heavy commercial vehicle (M&HCV) segment with a market share of 28 per cent (2007-08). Ashok Leyland is a market leader in the bus segment. In the trucks segment Ashok Leyland primarily concentrates on the 16 ton to 25 ton range of trucks.