Mahindra & Mahindra Financial Services (MMFSL) plans to raise $175 million (Rs 925 crore) through a Qualified Institutional Placement (QIP).
The capital is being raised to augment the long term resources by way of enhancing the Tier I capital base, the company informed the Bombay Stock Exchange. The current Capital Adequacy Ratio of the company is 17.4 per cent, with Tier I at 14.7 per cent.
The company is primarily in the business of financing purchase of new and pre-owned auto and utility vehicles, tractors, cars, commercial vehicles and construction equipment.
Early last year, the company had raised $ 80 million (Rs 426 crore ) through an issue of 6.13 million equity shares at Rs 695 per share.
The share price of Mahindra & Mahindra Financial Services closed at Rs 879.2 on Wednesday, down by 2.1 per cent in a Mumbai market down by 0.86 per cent.
At present, around 50 per cent of its funds continues to come from term loans and followed by Non-Convertible Debentures (NCD) of 22 per cent.
As part of its growth plans, the company is expecting to grow market share in rural and semi urban segments and vehicle and automobile financing market.
Early last year, MMFSL has entered into a joint venture with De Lage Landen Financial Services (DLLFS), a wholly-owned subsidiary of the Rabobank Group. DLLFS and MMFSL have 51 per cent and 49 per cent interest, respectively, in Mahindra Finance USA LLC.
According to reports, the plan was to get into newer geographies such as South Korea, South Africa and China, where M&M is already present.
Non-banking finance companies (NBFCs), especially those with a focus on the vehicle financing space, have attracted interest of private equity investors. This year firms like Murugappa Group’s Cholamandalam Investment & Finance Co, Esskay Auto Finance and AU Financiers have attracted PE funding.
MMFSL has also raised private equity funding from investors like Standard Chartered Private Equity and ChrysCapital in the past, who have since exited.
Present shareholders in MMFSL include Eastspring Investments India Equity open, JP Morgan Funds, Fidelity Investment Trust, Valiant Mauritius Partners and Cartica Capital. The company has 615 offices spread over 24 states and four union territories.
(Edited by Prem Udayabhanu)
