Cholamandalam Investment and Finance Company Ltd (CIFCL), part of the Murugappa group, is set to foray into gold loan business, beginning with a pilot in Andhra Pradesh, Tamil Nadu and Kerala, which account for 40 per cent of the gold loan market.
According to Arul Selvan, senior vice president and CFO, CIFCL, the company's board has given its in-principle approval for the proposed entry. “We are starting the business as a pilot. After 6-7 months, based on the outcome, we will scale it up including setting up exclusive branches for gold lending,” he said.
It would focus on the Rs 30,000-50,000 income bracket, and would lend up to 75-80 per cent of the value, Selvan said.
The company started as joint venture between the Chennai-based Murugappa group and Singapore-based DBS Bank Ltd. When the bank decided to end the partnership, Murugappa group bought out the former's stake of 37.48 per cent through Tube Investments of India (TII) for around Rs 150 crore.
For the year ending March 31, 2011, the company's consolidated profit after tax grew by around 61 per cent to Rs 84.58 crore from Rs 52.77 crore, during the same period last year. Disbursements grew by 48 per cent to Rs 5,731 crore from Rs 3,866 crore. For the current fiscal, Selvan projected 15-20 per cent above the industry level.
The NBFC's capital adequacy ratio is currently at 16.7 per cent. “To improve our CAR, we are planning to raise around Rs 300-500 crore, as tier II capital, through perpetual subordinated bonds,” he said.
The company would also apply for the status of an asset finance company this year. As per current RBI regulations, an asset finance company is required to keep 60 per cent of its total assets in asset-backed loans and the rest can be other loans.
“Our vehicle finance already touched 60 per cent level. This will allow us to get the status, which will help us to raise more money through debt,” he said. The other focus area for the company at present is corporate mortgage and home equity.
