Bidders Include Shriram Transport, Ashok Leyland, Magma & Rel Cap
V Balasubramanian & George Smith Alexander CHENNAI/MUMBAI
A HOST of non-banking finance companies (NBFC) have shown interest in acquiring the commercial vehicle and construction equipment portfolio of Citicorp Finance. Citicorp Finance, a Citigroup NBFC, has put its portfolio of around $1.2 billion on the block. Sources said six institutions have been shortlisted in the second round of bidding. These include Shriram Transport Finance, Ashok Leyland, Magma Shrachi and Reliance Capital.
The bidders are doing a due diligence of the portfolio and Citicorp is expected to close the deal in the next one or two months. The NBFC is into assetbase financing. Citi is looking at exiting this portfolio as part of its similar global move. The sources point that Citi is looking at realising around $200 million from the sale of this portfolio. But, the bidders have estimated the deal to cost around Rs 450 to Rs 500 crore going by a capital adequacy ratio of 10% based on the size of the portfolio. However, Citi will not go through deal is if it does not get a good enough valuation as it is not in a hurry to sell off this business. Citi officials refused to comment on the issue. STFC’s MD R Sridhar offered no comments saying it is the company’s policy not to comment on speculation. But, Shriram group sources confirmed the company is very much in the race. STFC manages the truck financing portfolio of Indian and foreign banks and has a five-year long relationship with Citicorp Finance.
Magma Shrachi’s MD Sanjay Chamria confirmed its bidding but declined to go into details. Ashok Leyland has joined the fray as it has revived its interest to have its own finance arm to provide a cost-effective financing solutions to truck operators.
ALL looks at focused funding
The company has found a gap in meeting their needs after the Hinduja group decided to strengthen Indusind bank by merging with erstwhile NBFC, Ashok Leyland Finance, which was promoted by ALL. The bank has turned brand neutral in financing vehicles and its share of ALL vehicles has come down.
ALL CFO K Sridharan said, “We have a tieup with more than six banks and NBFCs for vehicle financing. We want to have focused funding arrangement. After the merger of ALF, we have been looking at having our own format for vehicle financing.” He added: “We have bid for the Citicorp business so that we can make a headstart by acquiring a good portfolio and a large number of customers of Tata Motors.” This is because it has found that these customers accounted for bulk of CV portfolio of Citicorp.
Also, 50% of the portfolio consisted of construction equipment financing. It may not be of immediate interest for ALL but its acquisition will bring in synergy once the company diversifies into the manufacturing of construction equipment in a year, Sridharan said. Bidders for this portfolio will have to take on their rolls 300 staff. This is the first time that any institution has asked buyers of the portfolio to absorb staff. Though some private sector banks had looked at this portfolio they backed out as they felt the returns were not good enough.
