Essel Group plans to acquire NBFC to scale up finance biz

Asset reconstruction, white-label ATM segments on radar

The Subhash Chandra-promoted Essel Group plans to acquire a non-banking financial company (NBFC) to scale up its activity in financial services.

Amitabh Chaturvedi, the newly-appointed managing director of Essel Finance, said the company would pick up stake in a non-banking finance entity (about 26 per cent) and later on, the Essel Group will raise the stake to 51 per cent through fresh capital infusion.

The plan is to lend to small and medium enterprises. Micro finance and housing finance are also on the cards.

According to Vijay Bhaskar, executive director at Reserve Bank of India, NBFCs often take a lead role in providing innovative financial services to micro, small, and medium enterprises.

NBFCs’ unique selling points include simpler processes and procedures in credit sanction and disbursement Also, they are timely, friendly and flexible about terms of repayment aligned to the unique features of their clientele, albeit at a higher cost.

Chaturvedi said in the financial sector, there was room for one more player with strong brand value and reach to co-exist with players such as L&T Financial Holdings, Edelweiss Finance and Aditya Birla group.

Besides lending activity, the group was firming up a blue-print for getting into various segments of financial services. It already has presence in alternative asset and private equity management.

Broadly, there are five segments in the financial space that Essel is interested to grow over three-five years. First, the capital market — investment banking, asset management, wealth management and broking and distribution.

In insurance, it will focus on non-capital intensive areas such as general insurance and insurance broking. The third segment is the lending business covering small and medium enterprises, micro finance and housing finance.

The fourth category where the group has evinced interest is asset reconstruction, which looks at nurturing stressed assets.

The fifth area is technical services such as payments, white label ATMs etc, he said.

The Essel Group has a strong connect with the target population. Its media brand Zee is a household name with access to 170 million households. The financial services is an activity based on trust. The large distribution reach of Dish TV is also a strength, which could be used for reaching customers.

Chaturvedi said the capital for the financial sector business will come from promoters in their personal capacity or family office and external investors. None of the listed entities of Essel Group would be involved in capital injection, he said. The capital investments could be in the region of Rs 600-700 crore.

The group was not getting into capital-intensive activity immediately. In the beginning, it will work in non-banking financial activities such as lending to small and medium enterprises, asset management and investment banking areas.

The private equity and alternate asset business is already up and running. On the domestic side, it runs India Asset Growth Fund (IAGF) - a high-yield, fixed-income fund backed by real estate mortgage-backed securities. On the offshore side, it has Essel Credit Opportunities Growth Fund.

ESSEL’S PLANS FOR DIVERSIFICATION
    
Capital market
* Investment banking
* Wealth management
* Broking and distribution

Insurance
* Non-life
* Insurance broking

Lending business
* Housing finance
* SME
* Microfinance

Asset reconstruction

Technical services
* Payments
* White-label ATMs
* Money transfer