The Telegraph
Since 1st March, 1999
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Tata Home Fin selloff after lenders’ consent

Mumbai, Oct. 2: Tata Finance (TFL), looking at ways to discard non-core businesses, will take lenders of Tata Home Finance (THFL) into confidence before sale.

This has sprung from a commitment given by the company to some lenders that it will not bring down its equity holding in the housing finance firm below 51 per cent. Tata Finance officials dismissed fears that winning an approval could create problems in the selloff. Senior TFL officials told The Telegraph the commitment given to lenders with regard to its housing finance arm will not prove to be an irritant since it plans to talk to them before quitting the business.

TFL has already armed itself with an in-principle approval to pull out of business it does not see as central to its main-line activity. There have been reports that the housing finance division could be sold off to Industrial Development Bank of India (IDBI), but Tata Finance said talks with several suitors are under way, and that no one has been picked so far.

Sources say the company has, in the recent past, been able to secure confidence of its lenders in respect of its commitments. For instance, Tata Finance had given a commitment to lenders of Niskalp Investments and Trading Company (NITCL) that it would not lose its status of as a subsidiary of Tata Finance. But, NITCL did go out of the fold from June 2001 after it won lenders’ nod.

Tata Home Finance posted a dramatic increase in its total income to Rs 24.3 crore for the year ended March 31, 2002 from Rs 5.33 crore in the previous year. However, net profit declined to around Rs 9 lakh from Rs 19 lakh, largely due to mounting expenditure. In 2001-02, housing loans worth Rs 226 crore was disbursed against Rs 63.4 crore in the previous year. The company has a capital adequacy ratio of 15.07 per cent against the minimum capital adequacy norm of 12 per cent.

TFL has decided to focus on its core areas of commercial vehicles, cars and two-wheeler financing. In commercial vehicles, it has built up a new marketing team, apart from extending its branch network to increase its share in the business. Similarly, in two-wheelers, it is the preferred financier for major motorcycle manufacturers.

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