M&M to drive growth through IPO
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M&M to drive growth through IPO

An auto financing arm of M&M is planning to raise up to Rs 400 cr through an IPO for meeting capital needs for the future business growth.

india Updated: Jan 24, 2006 19:08 IST

First NBFC proposing to enter the capital market in over 15 years, an auto financing arm of Mahindra & Mahindra is planning to raise up to Rs 400 crore through an IPO for meeting capital needs for the future business growth.

With this, Mahindra and Mahindra Financial Services Ltd would join the list of NBFCs like Sundaram Finance, Bajaj Auto Finance, Cholamandalam Fiannce and Sriram Finance listed on the bourses.

M&M Financial Services Ltd has submitted a red herring prospectus with the market regulator SEBI to float two crore shares through IPO via the book building route.

The company's board of directors is meeting early next month to decide on the timing of IPO, its MD Ramesh G Iyer said.

"By that time, we expect to receive nod from SEBI for the issue," he said, but refused to tell his expectation about the timeframe.

Though Iyer refused to give his expectation about the amount that M&M Financial Services planning to mop up since SEBI bars any such forward looking statements, market sources said it would range between Rs 350-400 crore, depending on the market conditions.

On reasons to raise money in the capital market, M&M Financial Chief Financial Officer V Ravi said the proceedings would be utilised to meet capital requirements of business growth of the company, which focuses on auto financing in semi-urban and rural markets.

Elaborating on the future business growth, Ravi said advances by M&M Financial Servcies have grown at compounded annual growth rate of 35 per cent over the last 5-7 years.

During the first half of this fiscal, the company has lent Rs 1,882 crore, up 25 per cent over Rs 1,487 crore during the previous H1.

Pointing out that advances by the company are more in the second half than the first half of the year in the ratio of 40:60, the CFO expected that loans during this fiscal would be much more than Rs 3,300 crore disbursed during 2004-05.

The company gave finances for 54,000 vehicles during April-September, 2005, of which 80 per cent were financed in rural areas and 20 per cent in semi-urban areas.

As many as 15,000 of the total vehicles financed were cars, 10,000 were tractors, 6,000 second hand vehicles and rest were utility vehicles, three wheelers and other vehicles.

Of the total financed vehicles, 70 per cent were M&M vehicles and 30 per cent were other brands, Ravi said.

The company recently raised Rs 60 crore by divesting 4.16 per cent stake to Copa Cabana, a subsidiary of Chrys Capital.
Two years back, it also raised 17 million dollars of tier II and senior level capital from IFC.

The issue will constitute 23.26 per cent of the fully diluted paid-up capital of the company and bring down the promoters stake to 68 per cent from the present 89 per cent.

First Published: Jan 23, 2006 15:15 IST