Rupyy by CarDekho Drives Innovation in India's Auto Loan Market

🔍Insights

Nadeesh Kareemdathil, Apoorva Bajj

Jan 22, 2024 — 6 min read

Rupyy by CarDekho Drives Innovation in India's Auto Loan Market

The auto financing sector is witnessing substantial growth both domestically and internationally, geared by increased demand for vehicles and technology-driven business models. Lenders are increasingly drawn to this consumer asset class, leveraging online marketplaces, innovative loan platforms, robust analytics for credit assessment, and expanding dealership networks. Globally, the car loans market is anticipated to grow at a Compound Annual Growth Rate (CAGR) of 6.5%, reaching over $385 billion by 2028. Despite only 8% of Indian families owning four-wheelers, the auto loan segment's overall growth remains robust, particularly in used car financing. This trend is prominent among cost-conscious or first-time buyers, especially in Tier II and III cities, driven by attractive options like zero down payment, favorable interest rates, and flexible repayments. Forecasts indicate that the used-to-new car ratio may reach 1.9 by FY27, with over 8 million pre-owned units in circulation.

To facilitate accessible and affordable loans for used and new cars, two-wheelers, and electric vehicles (EVs) across India, CarDekho launched the digital lending platform Rupyy in April 2022. CarDekho, an established marketplace for new and used cars, introduced Rupyy to cater to the growing auto loan market. The platform, which originated in 2016, noticed the surge in the used vehicle segment during the Covid-19 pandemic and identified a long-term spike in demand, especially in non-metro regions. The parent company, Girnar Software, obtained an NBFC license in 2022.

Rupyy serves as an end-to-end digital lending platform, connecting buyers, dealers, and lenders to streamline financing options aligned with budget and requirements. CarDekho Financial Services (CDFS) merged with Rupyy, creating an efficient ecosystem covering the entire loan process – from application to approval to quick disbursal. The platform claims to have partnered with car dealers covering 90% of India's pin codes and onboarded over 37 lending partners, including HDFC Bank, ICICI Bank, Axis Bank, Kotak Mahindra, and YES Bank. With a strong presence in more than 1500 locations, Rupyy reported an annualized run rate of INR 12,000 Crore in disbursements as of August 2023, serving an annualized customer base of over 2 lakh customers. The platform witnessed an 88% YoY revenue increase and an 82% growth in its customer base during the same period, according to Rupyy founder Namit Jain.

Intelligence Under the Hood
Speed and Convenience Redefined
Tailored Solutions, Flexible Options
Statistics Speak Volumes
Building Trust, Transforming Lives
A Future Fueled by Innovation
Navigating Challenges to Establish a Niche
Overcoming Lending Challenges
Sustainable Growth in Tier II and Beyond
Market Dynamics and Future Prospects
Role of Lending in the Automotive Sector

Intelligence Under the Hood

Traditional lenders often impose stringent eligibility criteria, leaving many applicants in the lurch. Rupyy tackles this problem head-on by leveraging technology and AI to create a more inclusive, transparent, and user-friendly experience. Unlike traditional systems reliant solely on income checks, Rupyy goes beyond, analyzing diverse data points like alternate income sources, digital footprints, and social media behavior. This holistic approach paints a more accurate picture of an applicant's creditworthiness, opening doors for those previously excluded. This allows Rupyy to offer auto loans to individuals who might have been excluded by traditional lenders, opening doors to car ownership for previously underserved segments.

Speed and Convenience Redefined

Say goodbye to lengthy paperwork and endless queues. Rupyy's online application process is designed for speed and convenience. Within minutes, applicants receive loan approvals directly on their smartphones. This frictionless experience eliminates the administrative hassles typically associated with securing an auto loan.

With Rupyy, applying for a car loan is faster than ordering food online, says a smiling Priya Sharma, a recent Rupyy beneficiary who finally realized her dream of car ownership.

Tailored Solutions, Flexible Options

Rupyy understands that one size doesn't fit all. They offer a variety of loan options with customizable terms and interest rates to cater to individual needs and budgets. Additionally, their platform boasts features like on-road price calculations, EMI comparisons, and instant documentation assistance, empowering users to make informed decisions. "The variety of options was amazing," shares Rajeev Kapoor, another Rupyy customer. "I could choose the loan that perfectly fit my financial situation."

Statistics Speak Volumes

The impact of Rupyy's innovative approach speaks volumes. Within just two years, they have disbursed over ₹1,200 crore in car loans, with an average loan size of ₹4 lakh. This translates into over 30,000 car ownership dreams fulfilled, with a 40% increase in loan approvals compared to traditional lenders.

Rupyy has approved 40% more loan applications compared to traditional lenders, showcasing its commitment to financial inclusion.
Over 60% of these approved applicants were rejected by traditional lenders, highlighting the impact of Rupyy's alternative assessment methods.

Building Trust, Transforming Lives

Rupyy prioritizes transparency throughout the loan process. Applicants are kept informed every step of the way, with clear communication regarding fees, charges, and terms. This focus on transparency and customer service builds trust and empowers individuals to make responsible financial decisions. "Rupyy's transparent process made me feel comfortable and confident about taking on the loan," says Priya. "I knew exactly what I was getting into."

A Future Fueled by Innovation

Rupyy's impact extends beyond facilitating car ownership. It democratizes access to credit, fostering financial inclusion for millions of Indians. As Rupyy continues to innovate and expand, it holds the potential to revolutionize the entire auto financing ecosystem in India, the potential is vast. They plan to:

Further, refine their AI-powered credit assessment model to reach even more underserved segments.
Partner with more dealerships and car manufacturers to offer exclusive deals and financing options.
Expand their product offerings to include used car financing and personal loans.

By harnessing technology and prioritizing inclusion, Rupyy is putting millions of Indians in the driver's seat of their financial future, one loan at a time. As a financial product distributor, Rupyy earns commissions from lending partners for each loan disbursed through its platform. According to Jain, the most popular vertical for Rupyy is used car loans, constituting 91% of its revenue in FY23.

Navigating Challenges to Establish a Niche

The car financing landscape has witnessed a significant shift towards digitalization, enhancing scale and convenience. However, Jain acknowledges that the initial hurdle was the relatively small market size. With finance penetration under 3% in the pre-owned car segment, a new market had to be created. Established players such as CARS24 Financial Services, Mahindra Finance, State Bank of India, Bajaj Finserv, and Tata Capital presented additional challenges for CDFS and Rupyy to carve a niche. Lenders' risk averseness, heightened by credit card and car loan defaults, posed another obstacle. To address these challenges, Rupyy developed a data-backed asset pricing engine for more accurate risk assessment.

Overcoming Lending Challenges

Lenders hesitated to collaborate with a new lending tech platform, despite car loans being primarily secured. Rupyy tackled this by developing an asset pricing engine for precise risk calculation. The complexity of title transfer between sellers and buyers was another challenge. Rupyy addressed this by building a vast network of agents covering over 1,100 RTOs across India. Proprietary software was developed to create a hyperlocal network of car dealers, ensuring visibility for small dealers. These initiatives streamlined the transfer of vehicle documents and ownership.

Sustainable Growth in Tier II and Beyond

Rupyy's market research indicates that the Indian used car financing market, valued at $6.82 billion, is projected to reach $13 billion by FY2027, growing at a CAGR of approximately 24%. The platform aims for a 100% YoY revenue growth in FY24 and plans to expand its geographic coverage to 97% of pin codes. Rupyy aims to capture over 20% market share in the used car loan segment while focusing on new car loans.

Finance Penetration of Pre-owned Car Market Across India

Market Dynamics and Future Prospects

The used car market is evolving with more OEMs, new dealerships, and tech-enhanced lending platforms. Rupyy anticipates a surge in demand for certified pre-owned vehicles, driven by a growing organized loan market. However, factors like inflation, interest rates, and increased production costs may lead to rising used car prices. Industry insiders believe that the Indian market for new and used cars is far from saturated, providing substantial growth potential. While concerns about potential challenges exist, the overall outlook for the used car market remains optimistic.

Role of Lending in the Automotive Sector

Lending plays a crucial role in both new and used car segments, with 65-75% of cars in metros and non-metros being purchased with financing. This scenario presents growth opportunities for finance providers like Rupyy, emphasizing the importance of understanding unique customer needs, building trust, and tailoring customer journeys for differentiation in the market.