Rising rates take toll on GE Money

Rising interest rates took its toll on GE Money, once known as GE Countrywide Consumer Financial, which saw its net profit drop 81 per cent to Rs 10 crore in financial year 2007 from Rs 55 crore in FY06 despite a 21 per cent increase in revenue and 32 per cent growth in portfolio. Revenue for the same period went from Rs 794 crore to Rs 963 crore.

Personal loans constitute over 30 per cent of GE Money's Rs 5,000 crore portfolio - a segment that grew around 50%. So did the mortgage segment that touched almost Rs 800 crore.

 

Despite rising bad debts and what the company terms as mounting competition, it expects the personal loan portfolio to be the growth driver in the coming years.

This growth, however, seems to have come at the cost of portfolio quality with the company writing off Rs 180 crore as bad debt - most of which is learnt to be in the personal loan segment. There could be lots more to come - because almost half of GE Money's Rs 5,000 crore portfolio is unsecured.

One segment where GE Money has consciously slowed down is auto financing where its margins took a big hit due to growing competition in new car and used car financing. Its parent GE has invested over Rs 600 crore in paid-up share capital.

The company has reserves and surplus close to Rs 1,000 crore, which includes over Rs 750 crore from the share premium account.

GE Money has an all-India presence with close to 200 branches. A tough financial year and rising NPAs, especially in the personal segment, even led to GE Money being put on the block last year, but the sale could not be concluded - apparently due to valuation mismatch.

GE Money has said it has a AAA credit rating at this point. GE Money is incorporated as a Non Banking Finance Company and was incorporated in 1994.

GE Money also has an arrangement with Maruti Countrywide Auto Financial Services Pvt Ltd and GE Money Housing Finance for “sharing common resources including assets, employees and other administrative costs for effective utilisation of resources.”

This is a part of a series on unlisted companies. (By arrangement with UTVi Business News)