about lease and hire purchase literature review, features , research methodology

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STUDENT RESEARCH PROJECT
The lease and hire purchase in India
Prepared by
M. Venkata sai
Batch 2019 – bachelor of business administration
Centurion university of technology and management
Paralakhemundi
Supervised by
Dr. Debi prasad satapathy
Centurion university of technology and management

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Index
 Introduction
 Literature review
 Objectives
 Research methodology
 Major finding
 Conclusion

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INTRODUCTION
The acquisition of assets particularly expensive capital equipment is a
major commitment for many businesses. How that acquisition is
funded requires careful planning. Rather than pay for the asset
outright using cash. it can often make sense for businesses to look for
ways of spreading the cost of acquiring an asset to coincide with the
timing of the revenue generated by the business.
The most common sources of medium-term finance for investment in
capital assets are Hire Purchase and Leasing. Leasing and hire
purchase are financial facilities which allow a business to use an asset
over a fixed period, in return for regular payments.
The business customer chooses the equipment it requires and the
finance company buys it on behalf of the business. Many kinds of
business asset are suitable for financing using hire purchase or leasing,
including: - Plant and machinery, Business cars, vehicles, Agricultural
equipment, Hotel equipment, Medical and dental equipment -
Computers, including software.

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Literature review
IM Pandey
The aim of this paper is to critically evaluate the structure and
prospects of the leasing industry in India. Financial data of 29
selected leasing companies are analyzed to formulate the strategic
groups of the leasing companies. It is argued that the winners of
future would be either those leasing companies which are large in
size and affect economies of scale or those which are associated with
business houses. The options available to new entrants for successful
survival are to enter the leasing business either as a large company
or a specialized company. Entry on a leasing manufacturing will pose
difficulty in terms of government regulation, raising of large capital
and managerial capability

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Arthur Meidan
Management International Review, 36-47, 1984
As the international leasing activities are definitely on the increase,
the aims of this paper are to present some of the major problems,
advantages and constraints facing international leasing and to
suggest some potential strategies available. International leasing is
particularly important in the economic conditions prevailing
nowadays on the world markets for capital goods and services:
uncertainty on future demand, rapid technological change, lack of
confidence, increasing taxation and inflation. Leasing, both on
domestic and international markets, presents certain distinct
advantages to lessors as well as to lessees as elaborated in this
article. In most of the cases, international leasing provides the lessee
with additional flexibility on his use of resources, ability to better
plan his budgets, financial convenience, taxation proof advantages,
risk matching and flexibility in dealing with replacement decisions in
the face of rapid technological change. To the leasors, the world
markets present tremendous growing opportunities, leasing
accounting for 1% to 4% of the total capital formation in most of the
developed countries. To tap these markets and the existent
opportunities, more knowledge on the problems and the available
strategies in international leasing is required.

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Loveday A Nwanyanwu
Mediterranean Journal of social sciences 4 (4), 449-449, 2013
The purpose of this paper is to identify the influence of hire purchase
strategy of physical capital investment on financial performance of
construction companies quoted on the Indian Stock Exchange. Data
were obtained through questionnaire. Analyses were performed
using descriptive statistics and Pearson’s product moment coefficient
of correlation. Empirical results indicate that there exist a statistically
significant negative association between hire purchase strategy of
investing in physical capital and financial performance of
construction companies. It was concluded that considering the
complexities in service delivery, application of hire purchase as a
physical capital investment option, may not provide the quantum of
capital assets needed to satisfy expectations of customers
Nat Ofo
This paper explores the features of hire-purchase transactions and
distinguishes hire-purchase transactions from other commercial
transactions by utilising the ingeniously formulated ten Ps which
constitute ready-to-use criteria in telling hire-purchase transactions
apart from other commercial transactions. It also highlights some of
the contentious issues concerning some of the Ps. The conclusion
was reached that the delay in amending the extant India statute on
hire-purchase has retarded the growth of this otherwise popular
means of commerce and thereby adversely affecting the India
economy

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LEASING
DEFINITION OF LEASING
Lease is a contract whereby the owner of the asset(lesser) grants to
another party(lessee), the exclusive right to use the asset usually for
an agreed period of time in written for the payment of rent.
CONCEPTOF LEASING
• Lease finance denotes procurement of assets through lease. The
subject of leasing falls in the category of finance.
• Leasing has grown as a big industry in the USA and UK and spread
to other countries during the present century.
• In India, the concept was pioneered in 1973 when first leasing
company was set up in Madras and the eighties have seen a rapid
growth of business.
• Lease as a concept involves a contract whereby ownership,
financing and risk taking of any equipment or asset are separated
and shared by two or more parties.
• Thus, the lesser may finance and lessee may accept risk through
the use of it while a third party may own it.
• Alternatively, the lesser may finance and own it while the lessee
enjoys the use of it and risk.

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FEATURES OF LEASING
• Selection of an asset
• Purchase of an asset
• Use of the asset
• Rentals and instalments payment
• Recovering the cost of an asset.
Marketing of leasing is done by financing many kinds of assets to
consumers as well as business which includes:
 Plant and machinery
 Business cars
 Commercial vehicles
 Agricultural equipment
 Hotel equipment
 Medical and dental equipment.
 Computers including software packages.
 Office equipment etc.
LEASE FINANCING
• Lease financing is one of the important sources of medium- and
long-term financing where the owner of an asset gives another
person, the right to use that asset against periodical payments. The
owner of the asset is known as lessor and the user is called lessee.
• The periodical payment made by the lessee to the lessor is known
as lease rental. Under lease financing, lessee is given the right to use
the asset but the ownership lies with the lessor and at the end of the
lease contract, the asset is returned to the lessor or an option is

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given to the lessee either to purchase the asset or to renew the lease
agreement.
LEASE FIANCINGORGANISATIONS IN INDIA
 Private sector manufacturing companies
 ICICI BANK
 HDCF BANK
HIRE PURCHASE
Meaning of Hire-Purchase
• Hire purchase is governed by the Hire Purchase Act, 1972.It is a
special system of credit purchase and sale. In this buyer pays the
price in instillments i.e., monthly, quarterly or yearly etc. and also
some amount of interest.
• Goods are delivered to the buyer at the time of hire purchase
agreement but buyer will become the owner of goods only on the
payment of the last instalment. Such instalments are to be treated as
hire of these goods until a certain fixed amount has been paid, when
these goods become the property of the hire.
• The buyer cannot pledge, sell or mortgage the assets as he is not
the owner of the assets till the last payment is made.
FEATURESOF HIRE PURCHASE
 Credit purchase
 Instalment payment
 Ownership till last instillment
 Termination of the agreement
 Ownership of goods after all instillments payment.

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LEARNING OBJECTIVES
 explain the concept of lease financing, hire purchase
 discuss types of lease financing
 describe the essential features of lease financing, hire purchase
 Shriram investment limited in hire purchase for truck financing
FINDING
 There no of branches of Shiram investment limited in truck
financing increased considerably over the year the last three to
four a year there is not any increase in there no of branches of
Shiram investment limited
 From the above graph there is a significant increase in the
number of trucks financed from the year 1998 the finance
sector in increased

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RESEARCH METHODOLOGY
The present study is descriptive in nature and based on analysis of
secondary data. There was extensive use of secondary information in
the form of books, articles published in magazines, journals,
newspaper, reports of Banks, websites, circulars, pamphlets of the
banks, clippings etc.
DATA ANALYSIS
Shriram investment limited in hire purchase for truck financing
The Shriram Group began financing individuals for purchase of trucks
in1979. Today, the Group is among the largest financiers of individual
truck purchases. Over 60,000 truck drivers have been transformed
into owners of trucks, thanks to the Shriram Group. Nearly 140
Shriram Group Branches are active all over India, empowering small
truck operators to prosperity. And in the process, help moving the
Indian economy ahead.
Table 1 Growth in truck financing business

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Graphical representation showing the increase in number of
branches in truck financing
Graphical representation showing the number of trucks financed by
Shiram investment limited over the year
0
20
40
60
80
100
120
140
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
Chart Title
Series 1
0
10000
20000
30000
40000
50000
60000
70000
80000
90000
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
Series 1
Series 1

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CONCLUSION
In this unit major types of asset financing services are discussed. Lease
is an agreement whereby the lessor conveys to the lessee, in return
for rent, the right to use an asset for an agreed period of time. Hire
purchase is purchasing of an asset where is the hirer pays the value of
consideration in equal periodical instalments over a period of time.
Under leasing the lessor will be the owner of the asset while in hire
purchase the hirer will be considered as the owner Hire purchase is
extended for transport vehicles where as leasing is granted for
industrial equipment’s.