Centrum may buy part of Citifin India portfolio for Rs 700cr

The move is part of Citigroup’s strategy to shed non-core assets following the financial crisis.

Mumbai-based Centrum Group is in advanced talks with Citibank to buy a part of its Indian consumer finance arm’s portfolio for Rs 550-700 crore, according to two persons with direct knowledge of the matter.

As part of its strategy to shed non-core assets following the global financial crisis, Citigroup has been seeking buyers for its consumer finance unit CitiFinancial, including in India. Several names have been mentioned as suitors in the past. According to reports last year, Chennai-based Shriram Group pulled out of the race citing high cost of people, low returns on the mortgage business and lack of tax benefits in the proposed structure.

“Centrum’s financial services unit is conducting stress tests on CitiFinancial India’s portfolio. It is looking to buy personal, consumer durable and secured loans with tenures of 24 to 36 months,” one of the persons cited earlier said, requesting anonymity.
 

* CitiFinancial India posted net loss of Rs 459 cr for the financial year ended March 31, 2010

* If the deal materialises, Centrum is likely to put in Rs 100-135 crore for buying the assets

* Commitment from two private equity players for Rs 225-350 cr, rest to be raised through loans

Spokespersons for Centrum and Citibank declined to comment on the issue.

Centrum’s website describes it as one of the country’s top 10 fund mobilisers, one of the top three retail money changers, and one of the fastest growing wealth managers.

CitiFinancial India’s portfolio includes personal, home and consumer durable loans to retail borrowers. It had posted a net loss of Rs 459 crore on a total income of Rs 1,681 crore for the financial year ended March 31, 2010, according to rating agency Crisil.

If the deal materialises, Centrum is likely to put in Rs 100-135 crore for buying the assets, while it has got commitment from two private equity players for Rs 225-350 crore. The rest of the money is planned to be raised through loans from domestic banks.

Apart from CitiFinancial India’s portfolio, Centrum Group is also evaluating the portfolio of a South India-based non-banking financial company, according to the same set of people cited earlier.

For organic expansion of its retail financial services business, headed by Rajnish Bahl, Centrum Group plans to invest Rs 500 crore. In the last three months, it has opened 16 branches in major cities for its wealth management and retail stock broking businesses. It is also said to be in the process of roping in Sandeep Nayak from HSBC InvestDirect as the chief executive officer of its retail broking business.

Centrum has hired about 20 senior-level executives in the last 2-3 months for its retail financial services business. To name just three, it brought in S Ganashyam as chief operating officer from HSBC, G Chokkalingam as chief investment officer of Centrum Wealth Management from Barclays and Shankar Raman as head of investment products and advisory services from HSBC.

For its overseas foray, Centrum’s retail financial services arm has tied-up with a local bank in Hong Kong and plans to have presence in Singapore and West Asia.

The group's plan is to increase its distribution presence from 45 cities at present to 100 in three years.