SFL to demerge non-financial service investments into subsidiary

Board members have also approved private placement of non-convertible debentures worth Rs 7,500 cr

Sundaram Finance Ltd (SFL) is planning to demerge its non-financial services investments into a wholly owned subsidiary to ring-fence the regulated financial services assets of the group.

The company said on Friday that the Board of Directors has approved a proposal to demerge its non-financial services investments into Sundaram Finance Investments Ltd (SFIL).

The demerger process is initiated through a composite scheme of arrangement as per the regulatory requirements.

Over nearly six decades, SFL has invested in various non-financial service businesses, including the automotive and manufacturing business as a co-promoter along with the TVS Group. Some of the significant investments made during the period include fundings made to Sundaram Clayton, Wheels India, IMPAL, Brakes India and Turbo Energy.

Cumulative investment in these companies, in terms of book value, has grown from Rs 23 crore in FY2006 to over Rs 150 crore in FY 2016. Investments have yielded a cumulative dividend of Rs 199 crore in the last 5 years.

"Over the years, our investments in the manufacturing and automotive sectors have not only yielded significant returns, but they have also demonstrated a strong track record in terms of value creation," said T T Srinivasaraghavan, the managing director SFL.

The company will continue to explore investments options out of SFIL as well. The company's balance sheet and capital will remain robust post-demerger and it will continue to seek growth opportunities in the financial services landscape, he added.

As per the proposal, shareholders would receive one SFIL share for every share held in SFL till date. The appointed date for the roll out of the scheme is April 1, 2016. As a promoter, SFL will hold 26.47 per cent stake in SFIL while the remaining 73.53 per cent will be issued to all shareholders of SFL.

Board members have also approved the private placement of non-convertible debentures worth Rs 7,500 crore.