Apple Finance Ltd plans to raise Rs 600 crore during the calendar year 1997 through fixed deposits and the issue of short-term debentures.
While Apple will approach the public for its fixed deposits programme, it will rely on banks and financial institutions for selling its corporate debentures. The money received will be deployed towards retail financing, a senior executive of Apple Finance told Business Standard. Meanwhile, the company plans to scale down the interest rates on its deposits. Interest rates on one-year deposits will be reduced to 15.5 per cent from 16 per cent currently, rates on three-year deposits will be reduced to 17 per cent from 17.5 per cent at present.
A final decision on the matter will, however, be taken only after the board meeting which is slated to be held at the end of April. The revised interest rates will be effective only from the end of May, said a source at Apple.
Apple Finance, which is one of the market leaders in the auto finance business, has decided to exploit the strength of its marketing network for deploying the money it raises. The company will put a major chunk of the Rs 600 crore in its auto finance business. The company has a network of 83 branches.
Because of this, the company feels that chances of default on the part of customers is limited, thereby reducing the risk factor. Moreover, in auto financing, the asset is safe and normally there is no loss on the asset as the company can recover the vehicle in case of default. We are concentrating on retail financing since the margins are higher than wholesale financing, added the source. While the spread in wholesale financing is 2-3 per cent, the spread in retail financing is as high as 4-6 per cent.
Apple Finance Ltd saw its net profit drop for the 18-month period ended December 31 1996. The company posted a net profit of Rs 38.50 crore compared to Rs 46.56 crore for the year ended June 30 1995. It attributed the drop in profits to the hiving off of Aptech, its computer education division into a separate company .
