Chennai’s Murugappa Group is buying out its partner, Singapore’s DBS Bank Ltd, in their financial services joint venture Cholamandalam DBS Finance Ltd. The deal would involve Murugappa Group forking out over Rs 376 crore to buy the equity and preference shares held by DBS in the firm.
Murugappa Group firms, Tube Investments of India and New Ambadi Estates Pvt. Ltd, are buying out the 37.48% stake held by DBS for Rs 226.48 crore.
The deal also involves purchase of Rs 150 crore worth convertible preference shares from the DBS Bank. These shares, 1% fully convertible cumulative preference shares (FCCPS), were allotted around one year ago. It remains to be seen if Murugappa will have to make an open offer since the deal is between the promoters.
The deal will take Murugappa Group’s holding in the company to nearly 75%. Tube Investments, the flagship company of the Rs 15,907-crore Murugappa Group, will hold 57.41% up from 30.93% in Cholamandalam DBS and it will become its subsidiary.
This comes after DBS and Murugappa group exited their asset management joint venture last year. DBS Cholamandalam Asset Management Co. Ltd was sold to Larsen & Toubro Finance for Rs 45 crore in September last year.
The deal to buy the stake of DBS has been struck at a price of Rs 91 per share, which is at 1.1% premium to today’s closing price of Rs 90 of Cholamandalam DBS Finance.
Cholamandalam DBS Finance offers vehicle finance, business finance, home equity loans, mutual funds, stock broking and distribution of financial products to its customers. It has over 140 branches across India with assets under management of about Rs 8,546 crores. The company reported revenues of Rs 249 crore and a net profit of Rs 6.26 crore for the qurter ending December 2009.