Cholamandalam Investment and Finance Company Ltd has diluted 15 per cent stake to five private equity (PE) investors including International Finance Corporation (IFC) and Reliance Capital. The non-banking finance company (NBFC), part of the Chennai-based $3.8 billion Murugappa group, has raised Rs 250 crore through this dilution. The company is also planning to bring more equity investment during the first quarter of next fiscal.
M B N Rao, chairman, Cholamandalam Investment and Finance Company, said IFC and other private equity investors have infused Rs 250 crore capital in the company.
Speaking to Business Standard on the sidelines of the company’s AGM on Friday, Vellayan Subbiah, managing director, Cholamandalam Investment and Finance Company, said the investors include IFC, Amansa Investment Ltd, Aquarius Investment Ltd, Reliance Capital and India Capital Fund.
“We have diluted 15 per cent, out of which 10 per cent was picked up by IFC, which invested Rs 115 crore, while the rest Rs 135 crore was invested by the other PEs", said Subbiah.
“By the first quarter of next fiscal, we are planning for more equity infusion, which could be QIP, preferential allotment or rights,” he said. During the period, the company is planning to foray into asset-based agricultural financing, construction equipment and other segments.
The company is looking at diluting another five per cent during the next round of equity funding. It may be noted that earlier this year, the company raised around Rs 450 crore through QIP and diluted five per cent.
"We are yet to decide on the quantum of money to be raised during the next placement. It will be depend on the market growth, the dilution will be of similar level to the last placement of five per cent," said Subbiah.
The company raised its Tier II capital of Rs 181 crore during the quarter in the form of perpetual debt instrument (PDI) and subordinated debt. “We were planning to raise Rs 300 crore (Rs 150 crore through PDI and Rs 150 crore from subordinated debt), the remaining Rs 191 crore will be raised in a month,” said Subbiah.
The company as on March 31, 2011, had an asset base of Rs 9,133 crore of which Rs 6,026 crore (66 per cent of the total asset base) was vehicle finance, Rs 2,171 crore (24 per cent) was home equity, Rs 780 crore (8 per cent) was business finance and Rs 157 crore (2 per cent) were towards personal loans.
The company was reclassified as asset financing company (AFC) as per RBI regulations during the first quarter of the current fiscal and has set a target to grow by around 30 per cent. “This will help the company to raise funds at more favourable rates as compared to the earlier classification,” said Rao.
Subbiah added that during the current fiscal, the company was looking at adding another Rs 2,000 crore of asset base and looking at growing its commercial vehicle portfolio by 30 per cent and 20-23 per cent in home equity.
“Personal loan exposure has now brought down to one per cent of the managed assets and it is expected to completely rundown by September 2011,” said Rao.
According to the its annual report, the company has incurred a net loss of Rs 226 crore in 2010-11 on account of bad debts/provisions and expenses in this personal loan segment.
The company is planning to start its gold loan products, which will further augment the growth of the company, said Rao. He added that the other new businesses being evaluated by the company include asset-based agricultural financing, construction equipment and SME loans and the line extent being evaluated includes utility vehicles and housing loans, said Rao.
Subbiah said, “Gold loan will start by end of September this year and other new business foray will happen during the next fiscal.”
Cholamandalam Investment and Finance Company (earlier known as Chola DBS Finance Ltd) was jointly promoted by Murugappa group and Singapore-based DBS Bank Ltd. In 2010, the bank decided to end the joint venture and Murugappa group sold its entire stake of 37.48 per cent to Tube Investments of India (TII), a Murugappa group company, for around Rs 150 crore, following which company’s name was changed.
Gross income from operations was Rs 360 crore compared to Rs 261 crore in the first quarter of 2010 -11 registering a growth of 38 per cent. Consolidated profit after tax for the period ended June 2011 of Rs 32.36 crore as against a PAT of Rs 15.46 crore in the previous year.
