IndoStar Capital announces to acquire IIFL's commercial vehicle loans

Non-bank lender Indostar Capital Finance Monday announced it will be acquiring its peer India Infoline Finance's nearly Rs 4,000 crore-commercial vehicle loans for an undisclosed sum. The announcement of the deal comes amid a troubled time faced by the non-banking finance companies (NBFCs) which are being stretched because of liquidity issues and higher cost of funds.

IIFL Group's chairman Nirmal Jain told PTI that the company will now focus on home loans, gold and business loans segment, which have a better scope of scaling up adjusted for non-performing assets (NPAs). He added that IIFL may also look for inorganic growth opportunities for increasing its home finance portfolio.

The Everstone Group-promoted Indostar's total assets under management will go up to Rs 11,697 crore after the acquisition, branches will go up to 320 with the addition of 161 branches, an official statement said. The acquisition also entails the absorption of 1,337 employees, which will take Indostar's total employee strength to 2,337.

"This strategic acquisition which is profit accretive from day-one helps IndoStar to significantly accelerate timelines in achieving our goal of becoming the leading retail finance NBFC having a diversified and profitable asset book with strong growth prospects," Indostar's executive vice chairman and chief executive R Sridhar said. IIFL has done Rs 3,000 crore in commercial vehicle disbursements during the fiscal year 2017-18 and Rs 1,723 crore in the first half of the fiscal, it said.

For IIFL, the CVs constituted over 11 per cent of the overall Rs 36,400 crore of assets under management as of December 31, the statement said. "IIFL Finance will use the capital to scale up its core products of affordable home loans, small business loans and gold loans. This will allow IIFL Finance to grow, without having to dilute equity in near future," Jain said.

He termed it a "win-win transaction" where Indostar will become a significant player with scale given Sridhar's experience and credentials to lead CV financing business, staff will enjoy a seamless transition and customers will have uninterrupted service. The Indostar scrip was closed 3.57 per cent up at Rs 3207.90 a piece on the BSE at 1524 hrs, while IIFL Holdings was closed 8.65 per cent down at Rs 380, as against a 0.24 per cent improvement in the benchmark.

(With inputs from agencies.)