Mumbai, May 30: Industrial Development Bank of India (IDBI) has snapped up Tata HomeFinance (THL), taking another step towards its goal of becoming a universal bank.
A share-purchase agreement to transfer all shares of THLó worth Rs 49.98 crore ó to the financial institution was signed today. The deal marks IDBIís home-loan debut and THL, with 16 branches in 11 cities, is expected to serve as the building block in the quest. Industry watchers said IDBI is a late comer in the competitive business, where it will be pitted against its own subsidiary, IDBI Bank, and banks that have used low-cost funds to give home loan majors a run for their money.
However, IDBI feels the presence of too many players has not robbed the sector of its growth potential. More important, the venture is a part of the restructuring plan it has drawn up with the government.
The acquisition of Tata HomeFinance, a division of Tata Finance, marks the fulfilment of a dream nurtured by IDBI chairman P. P. Vora, who said while assuming charge as the chief that the institution would enter housing finance ó an area that is competitive, but relatively, free of the bad-loan problem.
Before he came to IDBI, Vora was the chairman and managing director of National Housing Bank, a wholly-owned Reserve Bank subsidiary. He will use the experience from his last job in the institutionís foray.
General manager Melwyn Rego, who has overseen corporate finance and international resources at IDBI, will be the CEO of the newly acquired housing finance firm.
IDBI said the skills of employees who have been working for the Tata company will be leveraged, along with those of its own team that will be sent to run the show.
The housing finance company would be in a position to make the best of the brand equity of IDBI, which has strong financial muscle, and carve a niche for itself.
Officials say Tata HomeFinance has, over the years, built quality service and good customer response as its strengths. Over time, more branches will be opened and be brought on-line, helping reduce processing time and boosting its ability to offer quality service. The housing finance subsidiary would offer both fixed and floating rate loans, depending on client needs. The focus will be on individuals, particularly the salaried.
In 2001-02, THLís total income rose to Rs 24.3 crore from Rs 5.33 crore in the previous year. However, net profit declined to Rs 0.98 million from Rs 1.91 million largely due to a rise in expenditure.