Hire-purchase firms merge to cope with rising competition
TWO LOCAL hire-purchase companies in the upper North of Thailand recently decided to merge to increase the scale of their business and to cope with the intense competition from the influx of more listed hire-purchase companies and financial institutions f
Heng Leasing Co is the result of a merger, completed last month, between Tawee Heng Group and Pattana Sin Leasing.
Tawee Heng Group provides hire purchase for consumers who buy used cars from tents, and car refinancing, while Pattana Sin Leasing provides loans to used-car buyers at tents.
Somrit Puntharat, the chief executive officer of Heng Leasing, said that both companies had a good relationship. However, they felt the organic growth of the two would not have been enough to compete with rivals from Bangkok hence they decided to merge.
Kasikornbank was the merger deal adviser.
Listed hire-purchase companies and banks in the hire-purchase business are expanding their branches in provincial markets to cash in on urbanisation. Some provinces are regarded as strategic markets because of their proximity to neighbouring countries.
Somrit admitted that the arrival of listed hire-purchase companies and financial institutions will increase the competition for used-car hire purchase in the upper North provinces and there may be a pricing war in this segment. Therefore, the company has to reduce operating costs and expand its business to the lower North.
After the merger, Heng Leasing has 58 branches in seven provinces in the upper North. The company will open eight branches next month in provinces in the lower North area, he said, and added that in 2016, Heng Leasing will have 30 branches in the lower North provinces.
“Lower competition in those provinces is attractive and we want to have strong footprint in new areas before the competition becomes intense,” he said.
Branch expansion will help reduce risk to the company from the fierce competition, he said, and added that the company has set an ambitious target to double loan portfolio to Bt1 billion in 2016. “We used to grow by 10 per cent per annum but the merger and the financial support from Kasikornbank will help the company to set a high growth of 30 per cent per annum,” he said. Further, the company is interested in being a member of the National Credit Bureau to track the credit background of customers.
At present, Heng Leasing services loans to self-employed people and general people who don’t have bank statements. The high risk of this segment increases the company’s operating costs compared to other financial institutions. Hence, interest charged to these customers are higher than that by financial institutions.
“When we have branches in all districts in the North, we would want to list on the stock market as many other hire-purchase companies have,” he said.
