Tata Home Finance Ltd has drawn up plans to do a rights issue of Rs 9.5 crore. To this effect, it proposes to issue shares at par to both the partners in the company -- Tata Finance and the UK-based Abbey National Plc. While Tata Finance holds a 63 per cent stake in the housing finance company, the British partner holds the remaining 37 per cent.
"The company needs money to grow. While the authorised share capital is Rs 50 crore, the paid up capital is Rs 40.5 crore. We want to raise it to Rs 50 crore," Tata Finance executive director F J DaCunha said.
As the rights issue involves inflow of foreign investment, the company has applied to the Foreign Investment Promotion Board (FIPB) for its approval. The board will refer the projection to Union minister for commerce & industry Murasoli Maran with its recommendations.
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It is worth noting that Tata Finance is on the lookout for a buyer for its stake in Tata Home Finance. About a month back, DaCunha had told Business Standard that the process of identifying a buyer for the stake would be over by June 2002.
Facing a financial crunch, Tata Finance had last year announced that it would be exiting a few sectors, including housing finance. The company was set up in May 2000 realising the huge potential in the sector.
Industry experts say that because of the consolidation in the housing finance sector in the wake of recent interest rate cuts in housing loans, the things have become difficult for a lot of housing finance companies. With the foreclosure norms coming into place, the big players are set to come into the market more aggressively and the profitability of the HFCs is to decline even further, the experts added. Recently, the banks have also started aggressively eyeing the sector as the non-performing assets are to the tune of only 2-3 per cent in the sector. This has added to the competition in the marketplace.