Giant NBGC IndoStar Capital Finance Ltd has reportedly bindingly agreed to buy the commercial vehicle finance arm of India Infoline Finance Limited (IIFL), a subsidiary of IIFL Holdings. The agreement includes the entire CV finance AUM worth Rs 3,949 crore, which includes Rs 2,450 crore of the loan portfolio and Rs 1,499 crore securitization portfolio, as on 31st December 2018.
The acquisition includes the 1300+ strong employee team spread across the 161 branches in around 18 states. This team has gained a gross disbursement more than Rs 3,000 crore for FY2018 and Rs 1,723 crore for the first half of FY2019, and the board has given its approval for this transaction. The announcement comes days after IIFL reported a 12% dip in consolidated net profit to Rs 220 crore for the December quarter of 2018. The move saw the stock value of IndoStar Capital Finance grow by 3% on Monday afternoon, post announcement. Contrastingly stocks of IIFL Holdings were down by 9% on the BSE at around 12.30pm.
IIFL, a diverse NBFC founded in 1995, provides small mortgages, loans against property, construction finance, gold loans, SME loans, capital market, and micro-finance loans. As on 31st December 2018, it had an overall AUM of Rs 36,400 crore, of which CV finance constituted 11%. The finance conglomerate is set to commence demerger of its subsidiaries, which is likely to be completed by April-May of 2019, as stated by IIFL Holding Managing Director R Venkataraman.
IIFL Group Chairman, Nirmal Jain, has said that IIFL Finance will use the sale capital to develop its core products, namely, affordable home loans, small business loans, and gold loans. He further added that this move would allow IIFL Finance to grow without having to compromise its equity in the future. Mr. Jain has said this deal to be a win-win transaction for both parties and believes that the move will allow IndoStar to become a leading player in Commercial Vehicle finance.
On the other hand, IndoStar Capital was created by Singapore based Everstone Group in 2011, as a corporate lending business entity. IndoStar entered on retail lending business in 2015, which gained momentum last year after it set up its CV finance and Affordable Housing Finance arms. The deal will increase the AUM of IndoStar from Rs 7,748 crore as on December 31, 2018, to Rs 11,697 crore. Out of this 62% or Rs, 7,217 crore is the share of retail AUM.
R Sridhar, Vice-Chairman, and CEO of IndoStar Capital have termed the agreement as a strategic acquisition, to accelerate their goal of becoming the leading retail finance NBFC. He said that the move would also position the company as an NBFC with a diverse and profitable asset book with strong growth prospects.
Shriram Transport Finance Company, the leading commercial vehicle company, posted Q3 net profit growth of 17% at Rs 635 crore. As on Monday, shares of IIFL Holdings closed at Rs 381.20 (-37.90) on NSE, and those of IndoStar Capital Finance closed at Rs 318.30 (+7.95).