Funds raised at 14.5%; promoters to pump in Rs 300 crore by month-end.
Non-banking finance company (NBFC) Cholamandalam DBS is raising Rs 750 crore against securities held by it at 14.5 per cent to correct its asset-liability mismatch.
So far, the finance company – which is a joint venture between the Murugappa Group and DBS Bank of Singapore – is the only company to have accessed the special purpose vehicle (SPV) floated by the government and RBI to bail out NBFCs by providing funds against commercial paper and non-convertible debentures to correct any asset-liability mismatch.
While confirming the development, a company spokesperson said that IDBI Bank’s Stressed Asset Stabilisation Fund – the designated SPV – had sanctioned the amount, which was proposed to be drawn in tranches by the end of the month.
“The refinance tenure will be for three months initially,” the spokesperson added.
| UNDER PRESSURE Consolidated results for the quarter-ended December | |||
| Rs crore | 2007.00 | 2008 | %chg |
| Operational income | 262.31 | 262.68 | 0.14 |
| Other income | 0.1 | 0.3 | 357.1 |
| Total expenditure | 134.5 | 153.8 | 14.4 |
| PBIT | 125.3 | 102.8 | -18.0 |
| Interest | 92.8 | 154.5 | 66.6 |
| Tax | 14.2 | -7.9 | - |
| Net profit/loss | 18.4 | -50.8 | - |
The NBFC, which is into vehicle finance, home equity loans and corporate finance, has seen a steep build-up in non-performing assets (NPAs) and has started a capital-restructuring exercise, though it has resumed lending in recent months. As part of the restructuring, Cholamandalam DBS promoters will pump in an equity of Rs 300 crore by the end of this month. Another Rs 200 crore capital-infusion is planned for the next financial year.
Further, it is creating a special standard assets provision of Rs 200 crore and is writing off bad debt worth Rs 100 crore. An adjustment of impairment loss in investment in one of the subsidiaries of the company – to the extent of Rs 23 crore – is also being made. The company, however, did not disclose the identity of the subsidiary.
It has sought permission to set off the adjustments out of the balance in the securities premium account. Higher delinquency in some of its portfolio has meant that the NBFC’s gross NPAs touched 4.33 per cent. However, sources said that – considering the reduction in the unsecured loan portfolio due to the withdrawal of disbursements of small-ticket personal loans – it was expected that, going forward, there would not be major pressures on the NPA front. The company has already shut down at least 50 branches.
After stopping disbursements during October and November, the company resumed fresh flow of loans since December, and company executives said that Cholamandalam DBS was disbursing over Rs 150 crore a month now and intended to scale it up to Rs 250 crore from April.
At the end of March 2008, vehicle finance accounted for 41 per cent of the company’s asset base of Rs 8,000 crore, while personal loans had a share of 29 per cent. Within the vehicle finance of around Rs 2,500 crore, commercial vehicle loans accounted for three-fourths of the portfolio.
