Chennai: Shriram Transport Finance Ltd, one of the largest financiers for pre-owned commercial vehicles, said it is buying 40% of an Ashok Leyland Ltd unit that has developed an electronic freight exchange for truck operators, for an undisclosed sum.
A subsidiary of India’s second largest truck maker, Ashley Transport Services Ltd has developed an IT platform linking transport operators and shippers. It has set up 29 kiosks in major truck centres in India and will add 71 more by March 2009.
“There could be a tremendous amount of knowledge arbitrage as the present intermediation is dominated by many thousands of brokers in the unorganized sector,” said R. Seshasayee, managing director of Ashok Leyland and chairman of Ashley Transport.
“Asset financing in the transport industry has moved from unorganized to the organized sector. But still, broking system and working capital financing are in the clutches of unorganized sector. We would like to address this sector,” said Shriram Group chairman R. Thyagarajan.
Ashley will offer two services: freight placement and bill discounting, or an offer to pay the shipper’s fee to the trucker upon delivery, cutting down on a 30-day waiting time. For freight placement, the fee is between 2% and 3%.
The plan is to capture 5% and 10% of the market over the next two years in both the segments, said R. Sridhar, managing director, Shriram Transport. The bill discounting market is estimated at around Rs70,000 crore per annum.
Ashley Transport will only originate the business for bill discounting; Shriram will do the financing. Currently, Shriram Transport does around Rs200 crore of bill discounting per quarter for its customers.