Wednesday December 31, 09:16 AM

Source: Indian Express Finance

Chola DBS to raise Rs 300 cr from promoters

By Corporate Bureau
A day after Fitch downgraded its long-term rating as well the Rs 75-crore subordinated bonds, non-banking finance company (NBFC) Cholamandalam DBS Finance Ltd has decided to knock the doors of its promoters - the Murugappa group of companies and DBS Bank of Singapore - to shore up its capital base by offering them fully convertible preference shares (FCPs), aggregating Rs 300 crore. Given the tight liquidity situation along with the negative ratings from Fitch, the company had decided to move the promoters with one crore FCPs at a price of Rs 100 each with a premium of Rs 200, totalling to Rs 300 crore. The company had at its earlier board meeting in late October decided to raise upto a maximum of Rs 500 crore to shore up its capital base as well as to improve its business prospects. FE had on October 29, 2008, reported that the company might turn to promtoers to raise the necessary funds. When contacted, a senior official of the company said, There will be no change in the equity pattern as the capital base will be expanded further with the new FCPs. Both the promoters - Murugappa group and DBS Bank - are holding 37.5% stake each in the company. According to the company, the Murugappa group of companies - Tube Investments of India Ltd, EID Parry (India) Ltd, Coromandel Fertilisers Ltd and Carborundum Universal Ltd together would pick up 50 lakh shares while remaining 50 lakh shares would be acquired by DBS Bank. The company woud seek the shareholders nod for the issue of the FCPs through a postal ballot soon, it informed the stock exchanges on Friday. It may be recalled that the company had to close 50 of its unviable branches earlier after the financial crisis broke out. These branches, primarily dealing with retail business, were found to be non-profitable and were bleeding. Following which, the company exited the consumer finance business lock, stock and barrel, which constitutes 8% of the overall managed assets of the company (Rs 8,800 crore). The vehicle finance business grew its managed assets by 22% and operating profits by 48% during the current half year, compared to the same period last year. The home equity business expanded its distribution to 21 locations from 11 and increased its managed assets by over 475% and disbursements by 297% as compared to the same period last year. However, the losses in the consumer finance business significantly affected the company s profitability.