IndoStar Capital Finance, a listed non-banking financial company (NBFC), said on Monday that it is set to acquire the consumer vehicle (CV) finance business of India Infoline Finance (IIFL Finance), a subsidiary of IIFL Holdings.
The acquisition includes the entire CV finance assets under management (AUM) of Rs 3,949 crore as on December 31, 2018, comprising Rs 2,450 crore of loan portfolio and Rs 1,499 crore of securitisation/assignment portfolio, together with an employee team of 1,337 members located in 161 branches spread over 18 states. The boards of both companies have approved the above transaction.
In a telephonic conversation with FE, R Sridhar, executive vice-chairman and CEO at IndoStar Capital, said the acquired portfolio on a static basis, without taking into account what IndoStar adds, should produce close to Rs 60-70 crore of net profit in fiscal year 2020 (FY20). Sridhar also said he found many complimentary factors about IIFL Finance’s business.
“My relationship with Nirmal Jain is two-decade old. Since he knows me from Shriram Transport days and the fact that I have been building a CV financing business, he checked with me (whether I would be interested in the portfolio). I saw that there is not much overlap between our businesses and both are complimentary to each other. I said it fits into my scheme of things and I am interested. We concluded the deal in 60 days,” Sridhar said.
IIFL Finance provides small-ticket loan products – mortgages, loans against property, construction finance, gold loans, small and medium enterprises (SME) loans, capital market and microfinance loans. The group intends to exit this business and focus on its core focus areas of home loans, SME, gold and microfinance loans, it said.
IIFL Group chairman Nirmal Jain said in a release IIFL Finance would use the capital to scale up its core products of affordable home loans, small business loans and gold loans. “This will allow IIFL Finance to grow without having to dilute equity in near future.” IndoStar said in an investor presentation that its overall CV finance business would break even in Q1FY20 itself on a significantly larger capacity and volume.
Furthermore, the firm claimed that following the acquisition, its disbursement capacity would increase from Rs 150 crore per month to Rs 350 crore per month. The branch network also increases from 159 to 320 overnight — saving over two years of build-up time. Post the acquisition, the CV finance AUM will go up to Rs 4,931 crore from Rs 982 crore at present, IndoStar stated.