India Infoline to dilute 40% in retail finance firm

India Infoline, one of the leading retail brokerage houses, is venturing into the consumer finance business in a big way.

The company is looking for private equity funding or a strategic partner for its new venture, India Infoline Finance Holding (IIFH). The newly formed holding company for retail financing business will be valued at Rs 800-1000 crore.

India Infoline will infuse around Rs 200 crore into IIFH directly, and around $100 million would be raised either through private equity or stake dilution to the extent of 30-40 per cent.

Sources close to the development said that negotiations are in an advanced stages with prospective investors. The company is banking on a huge network of 540 branches across the country and a ready retail clientele.

Indiainfoline has called off its partnership with DSP Merrill Lynch, which was holding equity in India Infoline. Senior employees of Citi Financial Group, who had joined DSP are now with India Infoline.

They include Apul Nayyar, formerly head of mortgage business, Citi Financial and Manoj Viswanathan, former head of branch network at Citi Financial.

India Infoline has four companies "� India Infoline Investment Service Company "� for margin funding and SME financing, India Infoline Distribution Company for distribution of retail loan products, Moneyline credit for consumer finance and a housing finance company.

The holding company is a subsidiary of India Infoline. After the dilution of equity, the holding company's net worth will be Rs 600 crore, which is more than some of the private sector banks. This amount can be leveraged by six to seven times and even outstanding loans can be securitised to generate further business.

Four finance companies whose holdings have been transferred to the holding company will be valued by a chartered accountancy firm.

Eventually, the newly created finance company can be listed on bourses.

The range of products and areas for financing could be expanded to micro finance, SME finance etc.

India Infoline is not the only company to form a holding company for separate subsidiaries engaged in various financial services. The Tata group and ICICI Bank have already done the same.

According to sources in the financial service industry, consumer finance is a more stable business than broking.