May look raising the money through private equity, QIP and other routes

The Rs 22,500 crore Murugappa Group’s NBFC arm Cholamandalam Investment and Finance Co Ltd is planning to raise around Rs 300 crore. The company has said it may look raising the money through private equity, QIP and other routes.

Speaking to Business Standard on the sidelines of company’s annual general meeting on Wednesday, Vellayan Subbiah, managing director, Cholamandalam Investment and Finance Co Ltd said that in 2014-15 the company plans to raise the money but the exact timing will depend on the environment.

“Mode we have not decided yet, we will look at traditional routes including QIP. PE is also an option, we are yet to take a final call on the route,” said Subbiah.

It may be noted in 2012-13, the company raised equity capital of Rs 300 crore through QIP route. The company also raised Rs 698 crore through perpetual debt and subordinated debt instruments to meet the CAR and business volumes.

The company is looking at growing by around 15-20% during the current fiscal, said Subbiah.

He added, “Current year is definitely going to be more challenging than last year and the company sees significant head winds in the economy. But we are convinced that its going to be a good year,” he said.

He added that company’s CAR is currently at 18%, which is higher than RBI’s norm.

De-risking strategy

In the last fiscal, the company has entered into three more lending areas, which Subbiah says was part of company’s de-risking strategy.

In the long run, the company doesn’t want to see itself fully dependant on the two businesses – vehicle finance and home equity – which account for nearly 98% of the loan book currently, said Subbiah. The company entered into home loan, rural and MSME lending during the last fiscal.

While ticket size for home loan is around Rs 20 lakh, for SMEs the ticket size will be around Rs 30-50 lakh, he said.

The two existing businesses will continue to grow, but over time it will tapper and our intention is to grow other businesses, which are currently being experimented and once we reach the comfortable position the company will accelerate the growth. At this stage these businesses contributes 3% of company’s book, he added.

Meanwhile, the company has decided to withdraw gold loan offering. It may be noted the company started gold loan in fiscal 2012 as a pilot project. Considering the turbulence and the several regulatory changes witnessed in the gold loan business, the company decided to withdraw gold loan offering, M B N Rao, chairman of the company told the shareholders at the AGM today.

Company’s gold loan disbursed and outstanding stood at Rs 19 crore which constituted less than 1% of the net managed assets.

Rao said, the company realigned its corporate finance business and reduced its finance against shares portfolio in line with its revised focus and strategy in this business.

Chola Invest reported a 30% growth in profit after tax during the first quarter ended June 30, 2013 at Rs 91 crore as against Rs 70 crore, a year ago. Total Income rose to Rs 762 crore from Rs 558 crore in the first quarter of 2012 -13 registering a growth of 37%.

While disbursements in vehicle finance growing by 29% and disbursements in home equity loans grew by 34% compared to the same period last year.

The Company disbursed Rs 2,609 crore in Vehicle Finance as against Rs 2,026 crore in Q 1 of 2012 – 13 and disbursed Rs 662 crores in Home Equity loans as against Rs 493 crore in Q1 of 2012–13.

Disbursements from new businesses were Rs 8 crore for the quarter. The aggregate disbursements of the company for the quarter are Rs 3,279 crore as against Rs 2,535 crore in the first quarter of 2012-13 registering a growth of 29%.

source: http://www.business-standard.com / Business Standard / Home> Companies> News /by T E Narashmhan / Chennai – August 01st, 2013