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GE Caps, GM Financial plan major buyout of car-loan assets
Biju Mathew & George Cherian
MUMBAI, January 4: Two international finance powerhouses, GE Caps and General Motors' financial services subsidiary, are scouring the country to buy up retail assets. They are targeting the car loan portfolios of erstwhile bluechip non-banking finance companies in a bid to gain size and market spread.GE Caps is in the closing stages of acquiring the vehicle finance assets of of Anagram Finance and the Madras-based Overseas Sanmar Ltd. This follows close on the heels of the company's buyout of the north-based SRF Finance some months back. Meanwhile, Mumbai-based 20th Century Finance has agreed to give up car financing entirely in favour of the new joint venture formed by it with GMAC Financial Services, General Motors' financial services subsidiary. The joint venture was formed in October, 1997, with GMAC Financial Services taking a majority 51 per cent stake and 20th Century holding the rest. According to the agreement, henceforth 20th Century will undertake the less lucrative truck financing, while
the joint venture with GMAC will utilise the 50-centre branch network of 20th Century to sell car loans. GE Caps officials last week finished due diligence of the books of Anagram Finance and are currently negotiating the method of transfer of control of assets. It is likely with GE Caps acquiring a majority stake in the company from Anagram's promoters, the Lalbhai group, or by floating a new joint venture which will subsequently pick up the entire vehicle finance portfolio of Anagram Finance, sources said. When contacted by The Financial Express, Anagram Finance managing director Satish Nadkar said: "We are looking for a joint venture partner and are talking with many foreign companies. GE Caps is one among them." However, sources say the deal is in the final stages. "A public announcement is expected any time now," said sources. The deal with Overseas Sanmar is also in the final stages, sources say. Negotiations were delayed following the insistence by promoters, Chemplast group, that they will
hold 49 per cent with GE Caps being allowed to hold a 51 per cent stake. Now, sources say, the Chemplast group has agreed to lower their stake. Another US retail car finance major, Ford Finance, has floated a 80:20 majority owned subsidiary, Ford Credit, with Kotak Mahindra Finance for dealer financing of Ford cars in India, while a 20 per cent minority share holding in Kotak Primus will give it access to the general car finance market. "All NBFCs worth their salt are in a hurry to tie up or sell out to a foreign company. In the current market, Rs 1,000 crore worth assets is considered the minimum feasible assets level for an NBFC to be viable. With their resource raising ability constrained due to various factors, they are in a hurry to tie up with foreign majors," said an NBFC source. According to sources, these international financial majors are looking aggressively for further acquisitions to build up volumes and retail network. The gameplan of GE Caps, according to sources, is to build up maximum volumes
in the vehicle and white goods financing segment within the shortest span of time. This would enable it to put to effective use its fabled back-up systems for retail financing and cheap resource raising ability. While SRF has given it a head-start in the northern Region, acquisition of Anagram and Overseas Sanmar will give it a major presence in the west and south respectively in vehicle financing. Countrywide Finance Ltd, GE Caps' joint venture with HDFC for hire purchase, will take care of its plans in the white goods segment. The acquisition of Anagram's business and Overseas Sanmar will catapult GE Caps to the leadership position in vehicle financing in India with assets of well over Rs 4,000 crore. GE Caps' biggest advantage is its ability to borrow at the best rates available in India due to the financial guarantees provided by its US parent. According to banking sources, GE Caps is the only NBFC in India which gets bank funds at rates on a par with Triple-A rated manufacturing companies because of the
overseas guarantee.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
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