Ashok Leyland's NBFC Hinduja Leyland Finance Limited is planning to raise Rs.200 Cr to increase its lending portfolio.

It plans to raise half the amount from promoter and IndusInd International Holdings Ltd, the majority owners of the company and balance Rs.100 Cr through private equity.

Transaction Note: Livemint

Incorporated in 2008, Hinduja Leyland finances only its parent’s brand in the heavy and medium-size commercial vehicles segment.

As of March 2011, company has disbursed over Rs.1200 Cr, operating from 420 locations in 20 states with nearly 700 employees.

Ashok Leyland's other NBFC Ashok Leyland Finance was merged with IndusInd Bank (IBL) in 2004. Ashok Leyland's vehicle sales had dropped 35% to 53,431 vehicles in the year ended March 2009, in the aftermath of the global financial crisis. This made the firm realize its problem of merging its finance arm, Ashok Leyland Finance, with IndusInd.

The company then decided to have its own dedicated finance arm and hence Hinduja Leyland was formed.

Ashok Leyland reported sales of 23,512 trucks and buses during the first quarter of the current fiscal, an 8% drop from a year earlier. Of the 94,106 vehicles sold by Ashok Leyland in 2010-11, Hinduja Leyland financed 5,000.

NBFCs that cannot raise deposits from public, depend on banks and financial institutions to raise money, which they lend to their borrowers. But a recent RBI move has restricted the flow of bank funds to some extent. RBI has said that bank lending to only microfinance NBFCs will get the priority sector tag.

Bajaj Finance Ltd (erstwhile Bajaj Auto Finance) is also planning to raise Rs.750 Cr through a mix of QIP and allotment of preferential warrants to promoter, Bajaj Finserv.

Recently, German carmaker Volkswagen received RBI Licence for its NBFC - Volkswagen Finance Pvt Ltd. Daimler AG, the maker of Mercedes-Benz cars, also received a similar RBI approval to set up a NBFC, for its financial services business in India.

Performance of listed Auto NBFC’s:

Company	Revenue (Rs.Mn)
	2008	2009	2010	2011
Mahindra and Mahindra Financial Services Limited	12163.91	13817.11	15612.25	20435.17
Sundaram Finance Limited	14306.8	17424.46	17364.4	20208.71
Shriram Transport Finance Co.Ltd	24941.4	37311.3	44996.4	54296.5
Magma Fincorp Ltd	4373.39	6290.61	7193.66	8723.41

Last year, ChrysCapital exited Bajaj Auto Finance in three separate deals. It sold its entire 9.06% stake in the company for Rs 240.6 crore through various open market transactions at an average price close to Rs.725 a share. It had invested Rs.47 Cr for 5.49% through a preferential allotment in January 2006 at Rs.450 a share. It made a profit of 60% on exit.

Also last year, Standard Chartered Private Equity (SCPE) made a partial exit from its two-and-a-half-year-old investment in Mahindra and Mahindra Financial Services. StanC PE which held around 9.8% as of June end, had been selling chunks of its holding since mid 2010. Last November, it sold half of its remaining 4.58% stake for Rs.167 Cr.

SCPE had earlier sold some shares at an average price of Rs.634 a share against an estimated cost of acquisition of around Rs.285 per share. Hedge fund TPG Axon along with SCPE had together invested Rs 415 Cr through a preferential allotment in March 2008 where TPG bought 7.22% and SCPE bought around 4% stake at a price of Rs.380 a share. SCPE bought additional shares from open market in 2008-2009 bringing down its average price of Rs.285 a share.

In 2009, TPG Axon exited through open market for Rs 184.21 Cr against its investment of Rs.266 Cr.

In yet another small exit, Genesis India Investment Company sold around 1.18% stake in Shriram Transport for about Rs.211 Cr in last September. Prio-stake sale it owned 6.97%. However, the amount of gain the firm made could not be ascertained.