Citicorp Finance India (CFIL), an associate company of Citibank Overseas Investment Corp of the US, will be setting up a downstream subsidiary to undertake underwriting and debt distribution activities. CFIL will acquire 100 per cent stake in Citicorp Brokerage India, another associate company incorporated in the country.
The equity of the proposed subsidiary will be a minimum $10 million, but will go up to $16.5 million over a period of time. When the company is fully capitalised, the paid up capital will be equivalent to Rs 65 crore. The Securities and Exchange Board of India (Sebi) will issue an underwriting licence to this company as per prevalent policies.
The Foreign Investment Promotion Board (FIPB), however, while recently okaying the proposal for setting up Citicorp Finance India, has put in a rider.
The board said the subsidiary can be set up subject to a minimum of 25 per cent domestic equity in the proposed company as a 100 per cent subsidiary would not be in conformity with NBFC guidelines.
Citicorp Finance had been granted permission to act as a housing financing company providing long-term housing loans to the middle class, extend facilities for construction loans, to develop and work in the area of development of mortgage business.
The approved 100 per cent foreign equity amounted to Rs 35 crore to be increased to Rs 100 crore over the next two years.
The setting up of a different subsidiary has been necessitated owing to the changes in the NBFC guidelines issued late last year by Sebi. It has been stated that when Citibank NA had requested permission for a comprehensive range of financial services company, it had envisaged the transfer of its merchant bank licence to CFIL.
After the FIPB nod last year for Citicorp, Sebi changed the registration and merchant bank licence procedures. Under the new procedures, financial services companies are required to separate their fund-based and non-fund based activities. Citibank said the move to set up CFIL was prompted by the fact that non-fund-based activities are required to be carried out by a separate subsidiary.
In its application, Citicorp has also stated it has brought in fresh capital for the proposed underwriting and distribution activities.
