International Finance Corporation (IFC), the investment arm of World Bank, has picked up 9.9% stake in Cholamandalam DBS Finance for Rs 100.23 crore. Chola DBS is a non-banking financial firm which is part of the Rs 16,000-crore Murugappa group. Last week, Singapore?s DBS Bank had exited Chola DBS.
Chola DBS will issue 1,08,93,852 fresh equity shares to IFC at Rs 92 a share, representing 9.9% of the expanded capital of the company. The proposal was approved by the Chola DBS board at a meeting in Chennai on Saturday. The company had earlier allotted three crore 1% fully-convertible cumulative preference shares (FCCPS) of Rs 100 each, aggregating Rs 300 crore in March 2009 and the said FCCPs are due to be converted before September. In order to maintain the minimum public shareholding, it is proposed to raise the equity capital, which in addition will be used to meet the growth/capital adequacy requirements.
The proposed investment in Chola DBS bodes well for the NBFC, as the company will benefit from IFC?s experience and support. After capital infusion by IFC and conversion of preference shares, the networth of the company will be close to Rs 900 crore and the promoters will continue to hold 74.9%.
N Srinivasan, director (finance), Murugappa group told FE: “Post issue to IFC and the conversion of FCCPs, the company’s capital base will increase to Rs 109.90 crore as against Rs 66.40 crore now. Currently, the company has a CAR of 15%. Keeping in mind the growth prospects, the company has decided to raise Rs 100 crore from IFC.” To a specific question, he said, “We don’t look at further fund-raising at this point of time, and there is no room for more investors to invest in the company. We don’t even require a strategic partner to run our business as we have gained substantial experience over a period of time.”