TVS Credit — Tractor Loan Disbursement Intelligence

1

🚀 The Rise — FY2022-23: Peak Performance

85% Disb Rate ▼

FY2022-23 was the golden year for TVS Credit's tractor loan portfolio. Beginning with 1,180 logins in April 2022, the business scaled rapidly to a peak of 2,309 logins and 1,817 disbursals in October 2022 — the highest single month in the entire observation period. The disbursement rate held at a stellar 85%, reflecting exceptional conversion efficiency and well-calibrated underwriting.

The portfolio was anchored by the Big 3 states — Rajasthan, Uttar Pradesh, and Madhya Pradesh — which together contributed over 80% of total disbursements. The dominant customer segment was Agriculture (self-employed farmers in owned land), accounting for 84% of disbursals. Average loan size was ₹481.6K at an average LTV of 71.25%, representing a balanced risk-return profile.

11,376

FY2022-23 Proposals

9,673

FY2022-23 Disbursals

85.0%

Disbursement Rate

1,817

Peak Month (Oct 2022)

✅

Strong funnel efficiency

85% login-to-disbursal conversion — for every 100 proposals, 85 were disbursed. The sanction and disbursement stages had minimal leakage, indicating a well-tuned origination process.

🏆

Geography concentration working in favour

Rajasthan (₹312.56 Cr), UP (₹280.01 Cr) and MP (₹256.45 Cr) are high agricultural intensity states with established dealer networks — the right markets for tractor financing.

2

📉 The Fall — FY2023-24 to FY2024-25: Multi-Layer Collapse

64.2% → Low ▼

Starting FY2023-24, a multi-layer collapse began. Login volumes dropped from ~1,200/month to under 700/month. By FY2024-25, the business was receiving only 150–270 logins per month — an 87% collapse from peak. The disbursement rate deteriorated from 85% → 77.7% → 64.2% across three years. The trough hit in January 2025 with just 116 disbursals — 93.6% below the October 2022 peak.

This was not a single-cause decline. The data reveals five compounding structural issues that simultaneously depressed both funnel volume and conversion quality.

FY2023-24 · 77.7% Rate

Login volume decline begins

9,357 proposals vs 11,376 in prior year (−17.7%). Disbursement rate slipped 7.3pp. High-risk proposals begin accumulating — Very High Risk cases represent 12.4% of the disbursed book.

FY2024-25 · 64.2% Rate

Severe volume compression + quality deterioration

Only 3,758 proposals (−59.8% vs peak year). Conversion rate hits trough of 64.2%. High LTV cases (>80%) total 5,998 in the book — a structural drag. January 2025: 116 disbursals (record low).

Root Causes Identified

Five structural issues compounding simultaneously

See findings below for detailed breakdown of each contributing factor.

🔍 Root Causes of Decline

🔴

Cause 1: Login Volume Collapse (Primary Driver)

Logins dropped from 2,309/month (Oct 2022 peak) to 153/month (Jan 2025 trough) — an 93.4% decline. Even with perfect conversion, fewer proposals mean fewer disbursals. This is the single largest lever in the decline. Possible causes: dealer attrition, competitive pressure, tighter lead qualification, or market saturation in core geographies.

🔴

Cause 2: High LTV Concentration (5,998 cases >80% LTV)

The portfolio carries 5,998 disbursed cases with LTV above 80%, representing significant credit risk concentration. This likely triggered stricter internal underwriting policies, creating a feedback loop: tighter policies → more rejections → lower conversion rate → lower disbursement volume.

🟡

Cause 3: High ROI Book (8,290 cases >16% ROI)

8,290 proposals carry ROI above 16%. High interest rates reduce borrower acceptance rates, increase prepayment risk, and may be pricing TVS Credit out of the market vs competitors offering lower rates for quality borrowers. This directly depresses conversion from sanction to disbursal.

🟡

Cause 4: CIBIL Score Gap (48.8% of disbursals have No Bureau Score)

10,668 of 21,852 disbursed cases have no CIBIL score. While this is manageable in agricultural lending (first-time credit users), it creates underwriting uncertainty and increases reliance on app score and collateral, limiting the ability to expand the eligible pool confidently.

🔵

Cause 5: Low App Score Cases (3,090 cases <700 score)

3,090 disbursed cases had application scores below 700 — the internal underwriting threshold. This suggests either policy exceptions were granted at scale, or the scoring model needs recalibration to better differentiate risk in the agricultural segment.

3

🌱 The Recovery — FY2025-26: Green Shoots

87.2% Rate YTD ▼

FY2025-26 shows compelling signs of recovery. The disbursement rate has surged to 87.2% — the highest in the observation period — suggesting that underwriting policy tightening has successfully filtered out poor-quality proposals. October 2025 recorded 727 disbursals and 688 logins, the strongest month since late 2023.

However, the volume remains far below peak. The business is converting well but the funnel remains thin. The key strategic question is: can login volume be rebuilt without sacrificing conversion quality?

87.2%

FY2025-26 Disb Rate (YTD)

2,861

FY2025-26 Proposals (YTD)

2,496

FY2025-26 Disbursals (YTD)

727

Oct 2025 Peak (Best in 2 yrs)

✅

Quality over quantity strategy is working

The 87.2% conversion rate confirms that tighter underwriting has improved disbursal quality. Fewer but better proposals are entering the funnel — the conversion engine is running efficiently.

⚠️

Volume recovery is the unfinished agenda

Monthly logins at 200-700 remain far below the 1,000–2,300 range of FY2022-23. Absolute disbursement volume needs to grow 3-4x to return to peak levels. The business needs a deliberate market expansion strategy.

4

🎯 Portfolio Segments: Where the Business Lives

Segment Deep-Dive ▼

The tractor loan portfolio is highly concentrated — by geography, customer profile, and employment type. Understanding these concentrations reveals both strengths and vulnerability.

🏛️ Top States by Disbursement

Rajasthan

₹312 Cr

Uttar Pradesh

₹280 Cr

Madhya Pradesh

₹256 Cr

Bihar

₹55 Cr

Andhra Pradesh

₹33 Cr

🎲 Risk Band Breakdown (Disbursed Book)

Ultra Low Risk

6,832

Low Risk

5,891

High Risk

3,423

Medium Risk

3,001

Very High Risk

2,705

⚠️

Concentration risk: 3 states = 80% of portfolio

Rajasthan, UP and MP together account for ₹849 Cr of the ₹1,052 Cr total. A slowdown in any of these states (drought, policy change, competitive entry) could materially impact business volume.

ℹ️

Agriculture dominates — 84.1% of disbursed book

18,368 of 21,852 disbursals are Agriculture profile (owned land). This is the natural sweet spot for tractor loans. The Non-Regular Income Earning Profile (3,166 cases, ₹157.85 Cr) is the #2 segment and represents an expansion opportunity.

ℹ️

Self-employed dominates employment mix (87.1%)

19,041 of 21,852 disbursals are self-employed borrowers. This is consistent with agricultural lending but underscores the challenge of income verification and the reliance on alternate credit assessment methods.

5

💡 Strategic Recommendations — Path to ₹2,000 Cr Portfolio

6 Actions ▼

Based on the portfolio data, correlation analysis, and trend patterns, the following six actions are recommended to rebuild disbursement volume while maintaining the improved conversion quality achieved in FY2025-26.

🤝

1. Dealer Network Expansion

Login volume is the primary lever. Onboard 50–100 new dealers in under-penetrated states (Bihar, Andhra Pradesh, Haryana, Punjab) to rebuild the funnel. Each new dealer typically generates 20–40 proposals/month.

🔴 High Impact

📉

2. ROI Rationalisation

8,290 cases with ROI >16% suggests pricing may be above market. Reducing ROI by 0.5–1% for quality borrowers (CIBIL >700, App Score >800) could improve acceptance rates and attract better-quality applicants who currently choose competitors.

🔴 High Impact

🗺️

3. State Diversification

Reduce dependence on Rajasthan+UP+MP (80% concentration). Target Karnataka, Maharashtra, Telangana and Odisha — all with existing but underserved agriculture bases. These states already have dealer presence but low volume.

🟡 Medium Impact

🔒

4. LTV Cap Enforcement

5,998 disbursed cases exceed 80% LTV. Enforce a hard cap at 82% with exceptions only for Ultra Low Risk (CIBIL >750 + App Score >800). This reduces NPA risk without materially impacting volume given the correlation data.

🟡 Medium Impact

📊

5. App Score Recalibration

With 48.8% of disbursals having no CIBIL score, the application score is the primary risk tool for agricultural borrowers. Investing in scorecard recalibration using disbursed vs. non-performing data can improve both approval rates and risk quality.

🟡 Medium Impact

🌾

6. Seasonal Campaign Timing

October 2022 was peak (Rabi season preparation). Align marketing campaigns with agricultural cycles — pre-kharif (May-June) and pre-rabi (September-October) to maximise login volume during natural high-demand windows.

🔵 Monitor

6

🔗 What Drives Disbursement? — Correlation Evidence

Data-Backed ▼

Correlation analysis across all 27,352 proposals reveals clear evidence of which factors most strongly predict whether a proposal will ultimately disburse. These correlations should directly inform underwriting policy and What-If scenario planning.

💰

Loan Amount: +0.95 (Strongest Predictor)

Larger approved loan amounts are the strongest predictor of disbursal. This is partly mechanical (sanctioned amount = disbursed amount when approved) but also reflects that larger-ticket borrowers have stronger intent to disburse. Average disbursed loan: ₹481.6K.

📈

ROI: +0.84 · LTV: +0.82 · Age: +0.81 · App Score: +0.80

These four factors form a cluster of strong predictors. Higher ROI cases disburse more (premium borrowers tend to commit). Higher LTV cases also disburse more (borrowers using full limit). Older borrowers (+0.81) have higher disbursement probability — possibly due to established farm operations. Strong app score alignment (+0.80) validates the internal scorecard.

💳

CIBIL Score: +0.55 (Moderate)

CIBIL has moderate correlation, surprising given its importance in most lending. This is explained by the 48.8% no-bureau-score segment — when CIBIL is unavailable, the decision relies on app score and collateral, and those cases still disburse at high rates. CIBIL matters most at the tails: very low scores (<600) and very high scores (>800).