Leasing market participants are looking for ways to increase business margins, including entering related segments. A new direction has become financing the repair of used equipment. There is a demand for the service, experts admit, but its development requires a restructuring of business processes and investments in personnel, and transactions in this segment are difficult to structure.
The DeltaLeasing company (part of the Insight Group, 11th place in terms of new business volumes for the first nine months of 2023, according to Expert RA - 41.696 billion rubles) began offering services for the repair, restoration and modernization of equipment. The equipment is purchased from the company and leased back to it, taking into account the cost of renewal.
The program is relevant for enterprises “whose equipment is obsolete and requires an increase in power, productivity or complete replacement, but the equipment no longer has analogues on the market due to the changed market conditions or, if there are analogues, their cost will be prohibitive,” explains DeltaLeasing. It is also possible to purchase used equipment at the client’s request, which will be modernized and meet the needs. “The service expands the sales funnel and increases business volume through additional services,” the company believes.
Lessors are now focused on expanding their product line and providing additional services, notes Anna Kudrinskaya, director of non-financial company ratings at NRA. Investment leasing of used equipment is in demand, the expert adds, but is associated with a number of risks associated with the liquidity of property, determining its fair value, the possibility of withdrawal and sale in the event of termination of the contract. “The advantages for the client are guaranteed servicing of the leased item, the possibility of obtaining working capital,” the expert summarizes. “However, the situation with parallel imports, reorientation to Chinese suppliers, delays in the supply of consumables may turn out to be risk factors for the leasing companies themselves.”
According to the Expert RA study, many industry participants cited “increased delivery times for machinery and equipment due to long distances and insufficient transport infrastructure capacity” as the main obstacle to market development in 2024.
At the end of 2023, according to the NRA, 611 thousand new items were leased. This result is 40% higher than the “crisis” year of 2022 (431 thousand) and 6% higher than in the previously record year 2021 (565 thousand). In monetary terms, the results for 2023 have not yet been published. The volume of new business in the leasing market for the nine months of 2023 reached a historical maximum of 2.49 trillion rubles, which is 95% higher than last year’s result, according to the Expert RA report.
Other market participants interviewed by Kommersant confirm the expert’s fears and are not ready to massively develop their repair business. This is even talked about in companies that specialize in equipment leasing.
Financing repairs is a non-core area for the market, explains Jalal Hasanov, head of the universal leasing group at Interleasing: “As part of the development of leasing as a product, we are forming a base of reliable suppliers who provide equipment maintenance.” Financing of repairs may become part of an additional service, but its launch will require the creation of new divisions and setting up business processes, adds Mr. Hasanov. “Due to the wide variety of equipment types, it is necessary to provide a pool of specialists with significantly different professional knowledge,” confirms Maxim Davidenko, head of the product and service development department of Alfa-Leasing Group of Companies.
In addition, such transactions are difficult to structure legally, clarifies the General Director of REGION Leasing Rustem Mukhamedov: “Property that belongs to the category of fixed assets can be leased; spare parts do not fall into this category.” A standard leasing agreement, he explains, may include additional services, such as commissioning, personnel training, warranty and post-warranty repairs, but this will make the contract more expensive for the client.