L&T Finance Holdings (LTFH) has entered into definitive agreements with France’s Société Générale Consumer Finance for the acquisition of 100 per cent stake of FamilyCredit Ltd, a NBFC with presence across two-wheeler and auto financing sectors for Rs 120 crore (~$22 million).
VCCircle had first reported on August 27 that L&T Finance is in talks to buy FamilyCredit from SocGen. The final valuation, however, was much lower than the asking price.
As of June 30, 2012, FamilyCredit had loan book size of Rs 1,287 crore of which two-wheeler financing constituted 53 per cent and car financing 35 per cent. It has 53 branches across 16 states in India and presence in more than 1,400 dealer outlets with a customer base in excess of 400,000.
In the quarter ended June, the NBFC’s profit after tax was Rs 5 crore, backed by a net interest margin (NIM) of 13.6 per cent. L&T Finance has plans to improve the operating performance further by exploiting its reach through branches and OEM relationships, and other operating synergies.
Y M Deosthalee, chairman & managing director of L&T Finance, said, “FamilyCredit is a significant player in the two-wheeler financing segment. The company offers a well established platform with robust credit and risk management systems. The business synergises well with our existing retail financing business and provides opportunity for us to further expand our product offering in the consumer finance domain.”
For L&T Finance this gives it a one shot entry into auto finance business, which takes time to build ground-up.
L&T Finance has been following a string-of-pearls acquisition strategy to expand its financial services business. Earlier this year, it bought a housing finance company and its mutual fund arm bought Fidelity Asset Management’s India portfolio, among many other small acquisitions in the past.
Equirus Capital acted as advisor to L&T Finance Holdings on this transaction.
Globally, SocGen has been trying to exit its non-core businesses and monetise its assets. Currently, SocGen has around six business units in India including retail banking, corporate & investment banking, asset management company (joint venture with SBI), BPO and SG Asia Securities that offers derivatives and programme trading products.
SocGen, along with the Burmans of the Dabur Group, had acquired 75 per cent stake in FamilyCredit (then Apeejay Finance) from Apeejay Surendra Group in July 2006. By December 2007, the financial services group had acquired the remaining stake in the company, making it a 100 per cent subsidiary of its consumer finance division.
(Edited by Prem Udayabhanu)