SBI Factors, GTF merger to be effective from 2009

"The process of merger is on and would take some time. I believe the merged entity would start its operation by next year," said DS Das, Managing Director and CEO, SBI Factors.

In January, the country's biggest lender State Bank of India (SBI) acquired 91 per cent stake in GTF, the largest factoring company, with Bank of Maharashtra holding the remaining stake.

SBI Factors and GTF together command more than 80 per cent of the factoring market, amounting to Rs 34,000 crore.

The total asset size of the merged entity would be around Rs 5,000 crore and this would go up to Rs 7,000 crore by FY09.

Under the new regulations, a factoring company can avail of banking finance only if 80 per cent of its business comes from core factoring. SBI Factors is thus looking at an alternative business model.

"We had to alter our business model under the new regulations. We would be focusing more on core factoring, including receivables factoring facility, purchase bill factoring facility and export factoring," Das said on the sidelines of the launch of the Kolkata office.

SBI Factors has set a business target of Rs 2,000 crore. An amount of Rs 1,600 crore will come from core factoring and the remaining will be contributed by the factoring of bills under the line of credit (LC).

This is in contrast to the last financial year. Out of the total business of Rs 1,840 crore then, Rs 1300 crore had came from LC factoring and core factoring accounted for the remaining Rs 540 crore.

The company has decided to give a major thrust to export factoring, which currently stands at Rs 80 crore. "We are looking to increase the export factoring business to Rs 280 crore by March 2008 from Rs 80 crore," Das said.