SBI Factors to start operations in 2009

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

In January, State Bank of India (SBI), the largest lender in the country acquired 91 per cent of the stake in GTF, the largest factoring company in the country, rest being held by Bank of Maharashtra.

Together SBI Factors and GTF commands more than 80 per cent of the factoring market space which in terms of volume amounts to Rs 34,000 crore.

As of now the total asset size of the merged entity would be around Rs 5,000 crore which would go up to Rs 7,000 crore by FY09.

With the change in regulations which entails that 80 per cent of the business of a factoring company should come from a core factoring, to be eligible for bank finance, SBI Factors is looking at an alternative business model.

"We had to alter our business model under the new regulations and as such we would be focusing more into the core factoring which includes receivables factoring facility, purchase bill factoring facility and export factoring," he added while talking with media in the sidelines of the launch of Kolkata office of SBI Factoring.

Consequently the company has set a target of Rs 2,000 crore business of which Rs 1,600 crore would come from the core factoring, and the rest coming from factoring of bills under the line of credit LC.

The mix is a contrast compared to the last fiscal, when out of total business of Rs 1,840 crore, Rs 1300 crore came from LC factoring and the reamining Rs 540 crore from core factoring.

Going on this line the company has decided to give a major thrust in export factoring, which as of now stands at Rs 80 crore.

"We are looking to increase the export factoring business to Rs 280 crore by March 2008, from the present figure of Rs 80 crore," Das said.