By Bharat Ahluwalia

Folks in the auto business could almost smell the rubber burn. Even as the car market stagnated in calendar 2000, someone's business saw a scorching growth rate. Financial institution, universal bank...call it what you will, ICICI saw its car loan disbursements clock Rs 1,000 crore during the year, up from Rs 250 crore in calendar 1999. From a wannabe a year ago, ICICI is now the largest car financier in India. Period.

Citibank? Well, it saw disbursements grow by Rs 100-150 crore, but that puts total disbursements about Rs 250 crore lower than what ICICI managed. Even Kotak Primus at No. 2 is Rs 150 crore less than ICICI.

The story actually began at Citibank, which V. Vaidyanathan quit a little over a year ago, to take over ICICI's car finance business. His mandate, in what's typical ICICI spiel in most areas it operates in: grow volumes. And that's exactly what he's done. Here's how. First, ICICI increased market penetration. It was present in 15 cities a year ago, now the number is 45. ''Added to that is the fact that we are strong all across the country,'' says Vaidyanathan. ''In most markets, we are either the market leader or a close second.'' Compared to this, Kotak isn't all that strong in the north, while Citibank could do with beefing up its presence in south and west India.

Second, faster turnaround times. ''Dealers love to work with us because of the speed with which we process loans,'' says Vaidyanathan, who is today Joint General Manager also handling credit cards, personal and two-wheeler loans. Another reason is because it increased the maximum commission payable from two per cent to three per cent. ''Though it's come down now, everyone has to benchmark himself against ICICI today,'' says an industry source.

Eventually, as always, it's about lower interest rates. Unlike other finance companies, ICICI never levied the one per cent service charge on small car loans. The deals it offers are also considered more transparent. In fact, it won the JD Power Consumer Financing Satisfaction Award. But eventually, it's volumes that allow ICICI to offer among the lowest cost-though there are slightly cheaper loans available-financing options. ''It's because of our volumes that we can offer good rates,'' says Chanda Kochhar, Senior General Manager and Head (Personal Financial Services), ICICI. ''The concessions offered to the customer are shared between us, the dealers and the manufacturers, so our margins aren't necessarily lower.'' Today, ICICI is the preferred financier for nine auto companies.

Its aggression showed again when ICICI was the first auto financier to snip rates after the RBI cut the CRR and bank rates. Such is the pressure on rates that survival in auto finance depends entirely on the skill of the treasury operations. ''Our costs are virtually equal to what we charge the customer,'' says an industry source. ''An interest rate spread is unknown in this business.''

And that's exactly what ICICI is counting on; build volumes and give yourself the ability to operate on wafer thin-some say negative-margins. That will raise entry barriers for others in the business, since it won't appear lucrative to them. And once you've got rid of some of the fence-sitters, have a ball.

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