Chola DBS net loss Rs 50 crore in Q3

Chennai-based Cholamandalam DBS Finance Ltd has reported a net loss of Rs 50 crore during the third quarter ended December 31, 2008 as compared to profit of Rs 18 crore during the same period last year. The decline primarily due to disbursements of vehicle finance and home equity business were lower due to the liquidity crunch as well as the slow-down in auto market. Cost of funds on fresh borrowings was also higher, according to company sources.

Company's total from operations dropped by 4 per cent to Rs 241crore from Rs 252 crore, a year ago, while expenditure increased by 16 per cent to Rs 160 crore as compared to Rs 137 crore, during the same period last year.

Meanwhile, the company had raised Rs 135 crore in September 2008 by way of conversion of warrants into equity shares. To further improve the capital adequacy and to meet the operating requirements, the Board of Directors approved a proposal to raise further capital aggregating up to Rs 500 crore in October 2008. Out of this, the Murugappa Group and DBS Bank Limited are bringing a capital of Rs 300 crores in the form of fully convertible cumulative preference shares and this is expected to be infused before end March 2009.

As a part of the overall restructuring plans, company's board of directors in their meeting held on January 30, 2009, approved a capital restructuring proposal including creation of special standard assets provision of Rs 200 crore to address the possible higher delinquencies, in the context of the overall economic slow down. Setting off Loan losses / write offs to the extent of Rs 100 crore.

Adjustment of impairment loss in investment in one of the subsidiaries of the company, DBS Cholamandalam Distribution Ltd for an amount not exceeding Rs.23.53 crores.