Indostar Capital snaps up CV loan portfolio of IIFL Finance

Small-sized non-banking lender Indostar Capital Finance Monday announced acquisiton of its peer India Infoline Finance's nearly Rs 4,000- crore commercial vehicles loan portfoilio for an undisclosed sum. The deal comes amidst the troubled times non-banking finance companies (NBFCs) have been facing following the liquidity crisis created by the bankruptcy of IL&FS group in last September and the resultant rise in cost of funds as banks are keeping off the sector.

IIFL Group chairman Nirmal Jain told PTI that the company will now focus on home, gold and business loans segments, which have a better scope of scaling up adjusted for non-performing assets. He further said IIFL may also look for inorganic opportunities for growing its home loan portfolio.

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

"This strategic acquisition is profit accretive from day one and will helps Indostar significantly accelerate timelines in achieving our goal of becoming a leading retail finance NBFC having a diversified and profitable asset book with strong growth prospects," Indostar executive vice- chairman and chief executive R Sridhar said. IIFL has done Rs 3,000 crore in commercial vehicle disbursements during year to March 2018 and Rs 1,723 crore in the first half of the current fiscal, it said.

For IIFL Finance, the commercial vehicles portfolio was over 11 percent of the overall Rs 36,400 crore assets under management as of December 2018, the statement said. "IIFL Finance will use capital to scale up its core products of affordable home loans, small business loans and gold loans. This allow us 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. Indostar scrip was closed 3.6 percent higher at Rs 320.90 on the BSE, while IIFL Holdings lost 8.65 per cent down at Rs 380, as against a 0.24 percent improvement in the benchmark..

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