Kmfl Forays Into Vulture Financing, Eyes 100% Spread

Kotak Mahindra Finance Ltd (KMFL) has launched vulture financing, which entails buying out bad assets of non-banking finance companies (NBFCs) at a discount and recovering the amount from debtors.

Venkattu Srinivasan, vice president, said this new line of business will be the focus area of KMFL's asset reconstruction division in the current financial year.

Srinivasan said, "This is a risky at the same time very profitable business. We can even earn a 100 per cent spread in some cases." Srinivasan, however, declined to fix up any target for the new business.

Srinivasan said, "We are the first one in India to venture into this business. We do not want to fix any landmark for us for the first year, but are hopeful of a big success."

"As many of the NBFCs are in the winding-up mode, there is big opportunity lying before us and we being the first player expect to exploit that," he said.

KMFL launched its asset reconstruction division last year which has been engaged in the recovery of non-performing assets of banks, management of asset portfolios NBFCs and recovering dues of the manufacturing and service providing companies. It has recovered a total asset of Rs 120 crore till date with success rate in case of NPA recovery is around 20 per cent.

According to Srinivasan, the success in asset recovery depends on innovative negotiation methodology, rather than direct confrontation. "For example we had to market the product of a manufacturing company, to recover the dues from them," he said.

Srinivasan held the network of branches of KMFL along with a chain of lawyers, detective agents and negotiation skills of the staff responsible for the success of the asset reconstruction division of the NBFC.

"We have 25 staff all over India, with average experience of more than 10 years in the field of asset recovery. With such a background and the experience of the company in recovering its own assets in 1995-96, we are hopeful that the new venture will be successful as well," Srinivasan said.