German auto giant Daimler AG is contemplating restructuring including spinning off its captive finance arm in India - Daimler Financial Services India Pvt Ltd (DFSI).

The proposed move comes close on the heels of the global business realignment strategy of Stuttgart-headquartered Daimler AG and the planned spin-off of Daimler Truck later this year. In February, the Supervisory Board and the Board of Management of Daimler AG decided to examine a possible spin-off of the Daimler Truck and Bus business.

Two independent firms

The plan is to create two independent companies — one for cars and vans and another for trucks and buses and to list Daimler Truck on the stock exchange subject to shareholder approval.

As a result, the financial services business is also expected to be restructured in tune with the realignment strategy. It is gathered that Daimler Mobility, a division of Daimler AG that provides financial and mobility solutions, will be divided into two different financial services companies for the car and van business as well as the truck and bus business globally.

While the proposed truck financial services arm may focus on lending and mobility solutions for Daimler trucks and buses, Daimler Mobility arm may dedicate its focus towards Mercedes-Benz luxury cars and vans as well as the electric vehicle business.

Daimler Financial Services India Pvt Ltd (DFSI), started in 2011 as a 100 per cent captive finance arm to support Daimler vehicles in India, has been providing financing options to customers and dealers of BharatBenz trucks and buses and Mercedes-Benz cars. Also, it provides a range of automotive financial services, such as leasing, insurance, extended warranty, and others.

Evaluating implications

“Daimler Financial Services India intends to support the future dedication in the best possible way and will continue to contribute passionately to the sales of desirable luxury cars and premium vans. In regard to financing and leasing of Daimler trucks and buses in India, we are currently evaluating the local implications of the possible spin-off,” Daimler AG headquarters said in a communication to BusinessLine .

“With internal combustion engine rapidly migrating to electric vehicles globally, the challenges are different and particularly for passenger car companies where the stakes are very high. Under Olla Kalenius, Daimler AG has been wanting to separate the passenger car and vans from trucks and buses. But I am sure (and that is sensible and pragmatic) that Daimler Financial services will remain as one unit for all of Daimler's businesses. Scale helps sourcing costs,” says Shyam Maller, Former Executive Vice- President at VE Commercial Vehicles Ltd.

DFSI's portfolio stood at ₹8,181 crore as on September 30, 2020 and it made a loss of ₹139 crore for the same period, said a Crisil report.