Cholamandalam Investment to expand into consumer finance

Board approves renaming of the company to Cholamandalam DBS Finance

Cholamandalam Investment and Finance Company's business operations will soon include consumer finance in the wake of the investment made by Singapore-based DBS Bank in the company.

At present, vehicle finance makes up about 82 per cent of Cholamandalam's balance sheet.

Cholamandalam's governing board on Friday decided to change the company's name to Cholamandalam DBS Finance, subject to necessary approvals. The new name takes into account the change in the ownership pattern of the company.

Murugappa Group, the original promoters of Cholamandalam, has brought DBS Bank on board.

Both groups hold 37.48 per cent stake in the company, while the balance is held by the public. DBS has invested Rs 220 crore through a combination of a 20 per cent public offer and purchase of the balance from the Murugappa Group, to take a stake in the company.

At a press conference on Friday, M A Alagappan, chairman of Cholamandalam, said that both partners plan to retain identical stakes in the company. "Should the company require more money for growth, both partners would bring in equal amounts," he added.

The partners have three members each in the governing board, while four members are independent directors.

The investment by DBS has led to Cholamandalam casting its net wider in search of business. Alagappan said that one of the major objectives of the ownership change was to engage in consumer finance such as unsecured loans and home equity loans. It also has a product for corporates.

The company has already introduced an unsecured loan product in three cities, which will be rolled out across the country later in the year.

DBS' representative on Cholamandalam board, Rajan Raju, explained the group's strategy in India. "It has a bank branch in India. The growth of DBS in India is centred around scale and access," he said.

The venture with Murugappa would tap the potential for consumer finance, while its bank branch would look at "tapping India's increased connectivity into Asia."

Cholamandalam has three subsidiaries, of which one manages a mutual fund, one is into securities broking while the third one is a distribution services company.

Unlike the parent company, the subsidiaries will be renamed with the name of DBS coming ahead of Cholamandalam's.