DBS investment awaits FIPB nod

The Murugappa Group's deal with Singapore's DBS to bring the latter as an equal partner into the group's non-banking financial services company, Cholamandalam Investment and Finance, is almost through.

Cholamandalam's MD M Anandan said the only governmental clearance required for DBS' investment was a Foreign Investment Promotion Board (FIPB) approval. DBS has already mopped up 20 per cent of Cholamandalam's public holding through an open offer at the price of Rs 150 a share. Once the FIPB approval comes through, Tube Investments (a Murugappa company) will sell 17.5 per cent of Cholamandalam equity to DBS at the same price.

Tube Investments' move will have two consequences. It will bring down the Murugappa stake in Cholamandalam from the current 55 per cent to 37.5 per cent. It will simultaneously allow DBS to hold 37.5 per cent in Cholamandalam. Originally, the deal between Murugappa Group and DBS was meant to include a preferential allotment of Chola shares to DBS.

However, the Sebi's amended guidelines on open offers meant that Cholamandalam could not make a preferential allotment to DBS. Therefore, Tube Investments decided to sell more than it had planned in the beginning.

He said that once the shares were transferred, Murugappa Group and DBS would each have three representatives on the governing body of Cholamandalam.