GE Capital has sought the approval of the Foreign Investment Promotion Board (FIPB) for buying out HDFC's 25 per cent stake in the consumer financing firm, GE Countrywide. The application comes almost eight months after HDFC decided to exit the venture.
Subject to approval, which is likely to come during this month, GE Countrywide will become a wholly owned subsidiary of GE Capital Services India, which is a subsidiary of GE Capital, US.
HDFC had made an equity investment of around Rs 8.3 crore in the venture, which is engaged in consumer financing in areas such as consumer durables finance, personal loan, car finance, travel, healthcare and education.
HDFC, on the other hand, plans to pursue an independent consumer financing business leveraging on its existing home financing and home mortgage financing business, sources said. "We plan to expand our consumer financing business which is now restricted to offering consumer finance facilities to our home loan borrowers. The same has been indicated in a letter to the government also.
While GE Caps has invested $97 million through GE Capital Services India, its equity investment in GE Countrywide is around Rs 25 crore.
GE Capital Services has an asset base of around Rs 6,000 crore. It could not be ascertained if GE Countrywide will continue as a subsidiary of GE Capital Services India or be merged into it. The company executive said there are no plans of a merger. The two firms can work out synergies between each other. Thus, the working capital requirements will come down and result in lower cost of financing to consumers.
GE Capital Services India, which made step-down investment in GE Countrywide, had sought approval from the government in 1998-99, seeking permission to convert the venture into a wholly owned arm. But the government turned down the proposal since the subsidiary had not been capitalised up to $50 million, as per the then prevalent policy. The policy was changed last year.
