Mufin Has Disbursed Highest Loans in Uttar Pradesh: Pankaj Gupta, Mufin Green Finance

Mufin Green Finance, which claims to be India’s first listed NBFC dedicated to green financing, began its journey in 2016 with E-rickshaws way back. The firm claims a market share of 5% in e-rickshaw financing and says it has been able to keep the NPAs as low as 1.92%. With a portfolio dominated by borrowers with a weak or no credit history,  Mufin Green’s claims to have disbursed over Rs 1600 Cr

While the EVs are deployed in the B2B channel, its consumer composition stands at 30% B2B (fleet operators) and 70% B2C (single owners). The firm has so far raised $7 million in green bonds from Symbiotics Investments with INR 50 crore from SBI Bank, INR 45 crore from Incofin India (key investor) and INR 150 crore from IREDA.

We caught up with Pankaj Gupta, Chief Executive Officer, whose last assignment was with Saera Electric Auto as Chief Growth Officer.

Tell us about your presence pan India. Which states in India have the highest rate of EV financing and why?

Present in 14 Indian States, Mufin Green Finance  is focused on financing EVs in areas where there are enough work opportunities for deploying the same and has a team dedicated to analyse the geographies and mapping the states which have more demand for EVs.

In terms of states with respect to loans, the highest loans disbursed by Mufin Green Finance were in Uttar Pradesh where around 9000 loans were disbursed with around 74crs in AUM. This is partly down to policy moves by the UP government such as benefits exempting road tax and registration fees for the first three years since the purchase of the EV effecting from October 2022, which kickstarted the sales and thus the demand of loan also skyrocketed.

Why is the two wheeler segment of EVs doing particularly well in India? What is the reason behind the spurt of E-rickshaws?

The electrification of the Indian mobility industry is flourishing at an astonishingly rapid speed, which is in tandem with global trends as climate change seemed to worsen. The first quarter of FY22 observed a 250% YoY increase and the factors attributed towards the growth has various reasons, including the rising awareness about the EV benefits, increasing availability of charging infrastructure and most importantly, the government’s push towards the adoption of electric vehicles and the myriad of initiatives launched by national and state government policies.

With alarming concerns with respect to air pollution and rising fuel prices, the growth demand of eco-friendly transportation was catapulted, special courtesy of two-wheelers as it is seen as a sustainable alternative. The subsidies and tax incentives further offered through FAME have also attracted many two-wheeler players and thus the 2Wh segment has flourished in recent times.

As per a recent study done by IMARC, The Indian Electric rickshaw market size reached US$ 1.2 nillion in 2022 and is anticipated to reach US$ 2.3 billion by 2028, exhibiting a growth rate (CAGR) of 10.7% during 2023-2028.

Rather than a spurt, owing to the ban on fuel-powered vehicles, there has been an increase in the demand for e-rickshaws and this, coupled with the rising fuel prices in the country, worked as a lucrative offer for growth opportunities to industry investors. Apart from this, due to the increasing urban population, there has been a steep demand for cost-effective first and last-mile transportation in India. In line with this, rising concerns about environmental pollution due to the utilization of diesel-fueled vehicles worked as a  demand catalyzer for e-rickshaws in the country. Moreover, key market players are extensively investing in research and development (R&D) activities to introduce improved e-rickshaws with powerful motors.

 

Tell us about your partnership with IREDA. 

With plans of strengthening its retail EV portfolio for two-wheelers and three-wheelers (mainly E-rickshaws & E-Auto), Mufin Green Finance had partnered with IREDA. Via the partnership, Mufin plans to reach 5000 consumers for an initial start and eventually the ultimate goal is to reach 1,00,000 by extending the partnership  and also reducing the borrowing cost by 40%.

 

Your target audience is rural and semi-urban areas. What are their awareness levels about EVs and how readily accepting are they of the idea of electric mobility?

As cited above, a huge credit to both the central and state government for pushing aggressively for the EV adoption in India. This is also thanks to the the state government’s policies recommending the constitution of EV accelerator aided in building the awareness level in rural and semi-urban areas. Various think-tanks including Niti Aayog perpetually came out with events, policy reforms, research papers and ideas to boost innovation in the EV sector which worked as a great vehicle of knowledge sharing in the underserved population.

The launch of E-Amrit portal by Niti Aayog in 2021 was primarily born out to serve the purpose of building better awareness among various stakeholders including consumers, citizens, OEMS and service providers.

Mufin Green Finance’s 70% target consumer portfolio comprises people with a weak or no credit history and has a dedicated team, which works closely with the underserved population with an aim to spearhead in bolstering the EV penetration in India whilst creating social impact and working towards with a slogan of  “Climate financing for a sustainable tomorrow “ and further improving the livelihood of the people.

 

What are some challenges in EV financing?

While EVs has been the new buzzword in the recent past and seen to be the new keywords in terms of popularity and demand, but unfortunately even today, when an consumer contemplates to purchase an EV, face a barrage of bottlenecks including limited financing options, a high turnaround time (TAT) and high loan to value aka (LTV) ratios to name a few. Still the major NBFCs hesitate to finance EVs due to high product risk along with the high credit risk and the deficient  second hand market. Mufin Green Finance was born with an aim to combat such challenges and as an industry expert, we believe that “including EVs in the RBI’s priority sector lending (PSL) guidelines are a must to streamline the smooth transition of EV financing/ green financing.

 

Tell us about the potential of market size in B2B fleet operations.

Whilst being an eco-friendly and sustainable and efficient last mile option, EVs seem to have a lot of advantages. With the government’s initiatives favouring electric mobility, there has been plenty of opportunities born out in B2B as consumers are showcasing immense interest in EVs.

The Indian EV market is expected to touch $150bn by 2030 with anticipated CAGR growth of 90% for the next decade, with B2B segment taking the driving seat for the next 3-5 years growth.

The the global pandemic has changed consumer behavior and catapulted the demand of E-commerce, which further made people shop online. This has further pushed e-commerce to swell up fleets to ensure supply to the increasing demand. As a domino effect, this aided in cost saving for EVs.

Both two-wheelers and three-wheeler EVs growth was also primarily driven by logistics fleet operators which ramped up its fleets to meet the rising demand of e-commerce and food delivery platforms. The fleet operators makes complete sense for EVs for two pivotal fronts including lowering cost and easier operation, eventually playing a massive role in bolstering the last mile delivery.

 

Tell us about the challenges in battery swapping and how do you see the future with respect to it ?

When we talk about EVs, the main issue which cropped up initially was its driving range and its need of requiring frequent charging. Battery swapping was born to combat this issue, in a nutshell. While the implementation of battery swapping is going to be a gamechanger for the EV ecosystem as it will curtail the charging time significantly in comparison to the traditional charging and thus boost the efficiently of the EVs, which is an need of the hour for India to become a leading EV player in the world. It also further aids in improving the driving flexibility and increasing the EV range, which is a huge blessing for long distance traveling where access to charging stations may be limited.

It is also a cost effective option for fleet vehicles and commercial EV fleets. With better battery standardization and compatibility in the long run could be extremely beneficial. Having said that, it comes with challenges including high infrastructure and operation costs and the maintenance of battery swapping stations could be an expensive affair.

While there was a recent policy by the government to implement the highest level of safety check with respect to EVs, with the battery swapping coming into the picture, EV players need to be extra cautious as it deals with high voltage and energy density for EV batteries and could be a huge hazard if not handled accurately.

Why do financiers continue to be apprehensive despite the strong EV sales?

While EVs have been the talk of the town and seen robust growth, complexities like high interest and insurance rates, high turnaround time (TAT) and high loan to value aka (LTV) ratios along with the common hesitancy factor including high product risk along with the high credit risk and the deficient second hand market create apprehension.

Well, the progression in the technological innovation happening in EV sector  along with key policy and initiatives with the aggressive government intervention along with extension research papers laid out by think-tanks like Niti Aayog ,SIDBI & FADA aided in the speedy adoption of EVs in India and helped to cut down on the apprehensions. Gradually, more financiers are understanding the hype about “EV being the buzzword and now financiers are becoming positive about the green financing.

Mufin Green Finance was one of the players which understood the pain-point and worked towards combating the issue and had a first mover advantage.

There is a lack of a second hand market for EVs. What explains it?

While EVs are making a major headway boosted by major EV players and then aggressive government push, it is still relatively new in the market in India, which makes it somehow tough to find a second hand electric car. Another reason that may be associated is the fact that as we use an electric vehicle, its battery performance drains with time, similar to how traditional petrol/diesel car lose efficiency over time, but with EVs, the battery performance drains more rapidly than the regular IC engine cars thus hampering the range level in second hand EVs.

As the EV technology is considerably new, the battery nowadays is covered with warranties, but with the second hand market, there might be a perception of inferior quality of batteries and less warranty associated.