GE Cap, Citicorp in race for picking strategic stake in Tata Finance

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Mumbai, Oct 31: In a move that will alter the landscape for fully homegrown non-banking finance companies (NBFC), GE Capital (GE Cap) and Citicorp are seen as the front-runners to pick up a strategic stake in Tata Finance even as the company is to undergo a capital restructuring and complete review of its business lines.

Further, Tata Finance has decided that it will stick to its core business — auto financing. It will also review all its peripheral businesses — credit cards with American Express, and Tata Housing — given that these are capital guzzlers.

Sources say that GE Cap is the stronger among the front-runners to pick up a strategic stake. It is being surmised that the present round of capital restructuring at Tata Finance is a clean-up act — warranted by the past goings-on at the company — and a precursor to a strategic, if not outright, sale to a potential acquirer.

Tata Finance’s new chairman, Ishaat Hussain, while confirming that a strategic partner will be looked at, did not reveal any name. He added that multi-lateral agencies were also potential candidates.

“We are talking to a few interested parties. But no names have been shortlisted,” Mr Hussain said. However, Mr Hussain ruled out Toronto Dominion as a potential partner. “They are not interested,” Mr Hussain said. Toronto Dominion currently partners Tata Finance in the debt business.

The company is also yet to take a decision on the percentage of stake to be offered to a partner.

On the business side, Tata Finance is going to stick to what it considers its core business: auto, which includes both two-wheelers and four-wheelers.

Said Mr Hussain, “This is core business. We set up other businesses like credit cards and housing finance too. Intrinsically, these are good, but they require capital. At this point in time, it would be fair to say that we will review all these ventures...the fault lay in execution of business strategy.”

Mr Hussain added that the company has traditionally enjoyed a premier status in the commercial vehicles and auto finance markets. “We would continue to strategically focus on these segments with a view to further consolidate our share in these markets,” he said.

Tata Finance has nearly Rs 1,500 crore of assets in the auto sector.
The renewed focus on these segments will mean that the company will grow this aspect of the balance sheet, and less on capital- intensive areas like credit cards and housing finance.

Mr Hussain said that if the company got a good deal, it will exit these businesses or sell down the portfolio even on a selective basis.