Sundaram Fin to merge Lakshmi General with itself

Consolidation seems to be the name of the game not only for banks but also for non-banking finance companies. The board of the Chennai-based Sundaram Finance (SFL) today approved an in-principle merger proposal of Lakskmi General Finance (LGF) with SFL. The merger is with retrospective effect from April 1, 2004.

The merger will be subject to approvals of the shareholders of the two companies, the high court of Chennai and Reserve Bank of India. The swap ratio is yet to be decided.

T T Srinivasaraghavan, managing director, SFL, said,"There is no one reason for the merger, economies of scale of operation, bringing in the strength of the two companies in terms of assets and clients. "

Srinivasaraghavan said the decision on closing down a branch, where both the companies have a presence, will depend on the location and size of clientele catered to.

LGF has 38 branches of which 33 branches of LGF are present in locations where SFL has its presence. Sources say the reason for the merger would be for cost cuts as the margins of NBFCs have been slipping over the last few years with the rising competition from banks.