Investment pattern of 28 NBFCs shows mixed trend in 2000-2001

Pradip Kumar Dey, FE Research Bureau

Investments by 28 non-banking finance companies (NBFCs) were 16.5 per cent higher at Rs 7,521 crore in 2000-01 over the corresponding figure of the previous year. Of this, debentures & bonds accounted for Rs 3,408 crore (45.3 per cent), company shares Rs 2,761 crore (36.7 per cent) and UTI Rs 418 crore (5.6 per cent).
In the previous year, the break-up was: debentures & bonds Rs 2,310 crore (35.8 per cent), company shares Rs 2,736 crore (42.4 per cent) and UTI Rs 426 crore (6.6 per cent). Though the investments increased in absolute terms, if the NBFCs’investments are seen as part of their assets, the NBFCs invested less than in the previous year in terms of investment-to-assets ratio, which decreased from 16.23 per cent in 1999-00 to 16.11 per cent in 2000-01. Six of the 28 NBFCs-Birla Global Finance, DSP Merrill Lynch, Harita Finance, Hinduja TMT, Piramal Holdings and Reliance Capital-recorded more than 35 per cent growth in investments over the previous year. During 2000-01, Birla Global Finance made investments of Rs 5.99 crores in Birla Sun Life Insurance Company Ltd., the joint venture life insurance company of Aditya Birla Group and Sun Life of Canada. Consequent to hive-off of its retail finance business to its subsidiary, Birla Global Asset Finance Company Ltd., the latter issued fully paid up equity shares of Rs 30 crore at a premium of Rs 60 crore and 15.5 per cent unsecured non-convertible debentures of Rs 158 crore. This has increased the investment of Birla Global Finance by 311.2 per cent during 2000-01. Another fifteen NBFCs recorded decline in investment during 00-01. Significant among them are Dewan Housing Finance (-53.1 per cent), GIC Housing Finance (-42.4 per cent), Kinetic Finance (-41.7 per cent) and Nagarjuna Finance (-34.3 per cent).

Two NBFCs, Birla Global Finance (Rs 157 crore) and Reliance Capital (Rs 985 crore, recorded an increase of more than Rs 150 crore in investments in debentures & bonds. Three NBFCs namely Harita Finance, M&M Financial Services and Piramal Holdings have not made any investment in debentures & bonds during 2000-01.

On the other hand Ashok Leyland Finance, Dewan Housing Finance, LIC Housing Finance, Nagarjuna Finance and Shriram Investment discharged their debentures & bonds during the current year.

Five NBFCs namely Birla Global Finance (Rs 82 crore), Hinduja TMT (Rs 157 crore), Kotak Mahindra (Rs 22 crore), Reliance Capital (Rs 20 crore) and Sundaram Finance (Rs 33 crore) recorded an increase of more than Rs 20 crore in investments in company shares. As regards investments in company shares, nine NBFCs disinvested a part of their shares investments during the year. Significant among them are Annamallai Fin, GIC Housing Fin, HDFC, Kinetic Fin, LIC Housing Fin, SREI International Fin and TCFC Fin. Eleven NBFCs showed an increase in investments in shares during 2000-01. Mention may be made of Birla Global Finance (Rs 83 crore), Hinduja TMT (Rs 157 crore), Kotak Mahindra (Rs 22 crore), Reliance Capital (Rs 20 crore) and Sundaram Finance (Rs 33 crore).

One interesting thing is that not a single NBFC made any investment in UTI schemes during 2000-01. Bajaj Auto Finance, Birla Global Finance, Escorts Finance and HDFC disinvested part of their UTI investments during the study period.

The top five NBFCs in terms of investments as a percentage of assets in 2000-01 were Tata Investment (95.00 per cent), Birla Global Finance (74.71 per cent), TCFC Fin. (67.67 per cent), Hinduja TMT (56.55 per cent) and Reliance Capital (50.24 per cent).

In 1999-00, the corresponding positions were occupied by the Tata Investment (97.22 per cent), TCFC Fin (84.08 per cent), Hinduja TMT (37.64 per cent), Reliance Capital (35.23 per cent) and Kotak Mahindra (29.14 per cent). Total investments of Tata Investment increased by 1.6 per cent to Rs 273.23 crore during 2000-01 from the level of Rs 268.82 per cent during 1999-00. Investments in company shares of Tata Investment amounted to Rs 245.49
crore during 2000-01 against Rs 250.53 crore during 1999-00.

Nine NBFCs showed a rise in the ratio (investment to assets) in 2000-01. Significant among them are Birla Global Finance (15.35 per cent in 1999-00 to 74.71 per cent in 2000-01), DSP Merrill Lynch (8.61 per cent to 12.72 per cent), Hinduja TMT (37.64 per cent to 56.55 per cent) and Reliance Capital (35.23 per cent to 50.24 per cent). Reliance Capital’s investments increased from Rs 1,290.25 crore on 1999-00 to Rs 2,295.23 crore on 2000-01, registering a rise of Rs 1,004.98 crore (77.9 per cent). The major component of growth was investments in debentures & bonds which accounted for a rise of Rs 984.73 crore.

On the other hand, significant declines in the ratio were witnessed in the case of Bajaj Auto Finance (17.75 per cent in 1999-00 to 11.96 per cent in 2000-01), HDFC (20.65 per cent to 15.92 per cent), Shriram Investment (5.34 per cent to 2.74 per cent) and TCFC Fin (84.08 per cent to 67.67 per cent).The highest and lowest investment-assets ratio can be seen in the case of Tata Investment and Harita Finance respectively in 2000-01.