Mumbai, Jan. 15: Mahindra & Mahindra Financial Services Ltd, a subsidiary of Mahindra & Mahindra Ltd (M&M), plans to venture into housing finance, personal loans and distribution of mutual funds.

At present, the company finances utility vehicles, cars and tractors. It plans to emerge as a preferred financial services firm by increasing its presence in the country and diversifying its product portfolio. It has already entered the insurance brokerage business through its subsidiary, Mahindra & Mahindra Insurance Brokers Ltd (MIBL). The company wants to enter new business lines either directly or through a subsidiary.

M&M had announced in October that it plans to sell 14.25 per cent of Mahindra & Mahindra Financial Services through an initial public offering. The public issue will increase the company’s Tier I capital base and provide funding for loans to its customers. The listing is expected to provide liquidity to its shareholders, including those under the employee stock option scheme.

The offering of 2 crore shares comprises a fresh issue of 1 crore. Shareholders will put on block another 1 crore shares.

The issue will constitute 23.26 per cent of the fully diluted post-issue paid-up capital of the company. After the offering, M&M’s holding in the subsidiary will come down to around 68 per cent.

Mahindra & Mahindra Financial Services was initially set up to provide finance to M&M dealers for purchase of vehicles and tractors. However, over a period of time, the company has been able to increase its share of lending to non-M&M vehicles though it continues to largely finance the utility vehicles and tractors of its parent.

The company had more than 255 branches in the country at the end of last fiscal. It has entered into an arrangement with Hindustan Petroleum Corporation Ltd wherein the financial services arm will establish its outlets in select petrol stations owned or franchised by the corporation.

These outlets will create opportunities for new loans and provide payment services for existing ones.

According to the draft prospectus submitted by the company to the Securities and Exchange Board of India (Sebi), its loan assets have grown to Rs 2631 crore as of March 31, 2005 from Rs 1710.6 crore in the previous fiscal. As of September 30, 2005, the net non-performing assets stood at 4.6 per cent of its total assets.

The country’s auto finance market (in terms of finance provided) grew to Rs 31,200 crore during 2004-05 from Rs 7200 crore in 1988-89, according to CRIS Infac. This figure is expected to touch Rs 57,800 crore over the next three years.