Farallon buys 33% in Indiabulls Credit

In one of the largest deals of its kind, US private equity financier Farallon Capital has picked up a 33.3 per cent stake in Indiabulls Credit Services Ltd (ICSL) for Rs 88 crore.

The money will be used by ICSL, a subsidiary of Indiabulls Financial Services Ltd, for expanding its consumer finance and mortgage businesses.

Gagan Banga, marketing head of Indiabulls, said the company was targeting a loan portfolio of Rs 100 crore in the next 6-7 months.

"We had a soft launch of the consumer finance business two months back. We are now going for a commercial launch," he said.

Farallon Capital is a registered investment advisor with the US Securities and Exchange Commission, and is a multi-strategy investment fund with over $12 billion in assets under management.

Banga said that the loans will be offered for consumer finance at the rate of 1.99 per cent.

As for the mortgage business, "we are working on the product," he said.

ICSL will engage in offering personal loans to the vast middle-markets under its brand - Easy Money.

The new funding will be utilised for the expansion of this business by increasing technology and infrastructure investments.

The company plans to add retail outlets over the next year for disbursing loans to its target market.

"The consumer finance market is hugely untapped," said Banga pointing out various studies that had observed that this segment was robust and growing. Despite this, nobody has even looked at the potential of the industry, he said.

With the Farallon infusion, Indiabulls will have a capital base of over Rs 130 crore. "At present we have capitalised it to the extent of Rs 30 crore," said Banga. Farallon had also invested in Indiabulls Financial Services in February 2004 at Rs 25 per share and has not sold any shares till date.

The current investment values ICSL at Rs 263 crore.

Farallon has a very strong track record in the financial services sector, and is the founding private equity investor in Capital Source, a $3 billion middle market finance company in the US.

Farallon also bought Bank Central Asia, the largest private bank of Indonesia, in 2002 during the privatisation drive launched by the then Indonesian government.