International Finance Corporation (IFC), the private sector investment unit of the World Bank, is picking up 9.92% stake in Cholamandalam DBS Finance (CDFL), for Rs 100.23 crore. IFC will subscribe to 10.8 million fresh shares to be issued by the NBFC at a price of Rs 92 per share on a preferential basis.
The preferential allotment to IFC comes within a week of the Murugappa Group’s decision to regain complete control over the 30-year-old finance company by buying out its foreign partner Singapore’s DBS Bank for Rs 376 crore.
CDFL said the preferential offer to IFC is to improve the liquidity position and strengthen its capital adequacy ratio. The stake sale is also to maintain the minimum public shareholding of 25%.
Chola DBS has now sought shareholders green signal for the share offer to IFC and increasing the authorised capital from Rs 400 crore to Rs 420 crore.
IFC’s investment will help the NBFC get a long-term strategic institutional investor that will also help it raise long-term debt and entering infrastructure financing.
Last week the Murugappas announced the acquisition of the entire 37.48% stake held by DBS Bank in CDFL for Rs 226.46 crore which will increase the group’s stake to 74.96%. The purchase price was Rs 91 per share. The group, through Tube Investments, will also acquire the Rs 150 crore investment made by DBS Bank by way of 1% FCCPS.
Although, the conversion into shares will push up promoters holding beyond the permissible 75% level, the preferential allotment to IFC will allow it to go through.
The NBFC which has 170 branches has a loan portfolio of Rs 5,000 crore almost two thirds of which is vehicle finance. The size of corporate mortgage products is Rs 1,100 crore, home loan equity of Rs 500 crore, and a personal loan of Rs 500 crore.
NBFC business has been an attractive space for private equity investors. Temasek backed Fullerton is already present in the business and TPG had picked a large stake in Shriram Transport Finance.
