CitiFinancial Retail Services, a non-banking finance company of the Citigroup, plans to disburse Rs.200 crore and earn Rs.39 crore during this calendar year, a quantum jump from the Rs.67-crore disbursed for the period March- December 2000. The company plans to achieve a disbursement figure of Rs.1,000 crore in a period of four years.
Formerly known as Nationwide Finance, the Rs. 5-crore equity company was rechristened last March when the Citigroup acquired a 74 per cent stake from Sak Industries Ltd. for Rs. 30 crore. At the time of the takeover, Nationwide had a net worth of Rs.10 crore and had posted a profit of Rs.2.5 crore.
Citigroup opted for the acquisition route to get into this sector as it wanted a small, but successful Indian consumer durable financing outfit that could be scaled up in course of time. And Nationwide fitted the bill perfectly.
Though the Citigroup has not infused any additional funds subsequent to the takeover, CitiFinancial, headquartered in Chennai, will soon raise the necessary funds via non-convertible debentures (NCD), commercial paper, cash credit and/or preference share capital. "Equity infusion will match the regulatory requirement", said the company's director, Mr. Jayakumar.
With the backing of Citigroup, the cost of finance for CitiFinancial has been drastically reduced. Though rated -MAAA for NCD and M1+ for commercial paper by rating agency ICRA, CitiFinancial, according to Mr. Jayakumar, is able access funds like a triple A-rated company.
"The cost of finance after the takeover has gone down by 300 basis points. Now our finance cost is between 9.5-11.5 per cent", he added. He also ruled out looking at public fixed deposits as a source of fund.
While the first phase of operations would focus on consumer finance for consumer durables like two wheelers, personal computers, etc., the company, at a later stage, also intends to offer other products like personal loans, credit card and insurance products. He specified that the company would not be hiring any third party to process loan applications.
According to Mr. Jayakumar, CitiFinancial is negotiating with a couple of life and non-life insurance companies. "While on the non-life side, we may sell personal accident policies, in the life segment, we are yet to work out the economics and the financial model", he added.
Speaking about the company's target clientele, Mr. Dinesh Sharma, joint managing director, said the company is looking at the 'under-banked'/middle segment-persons with a monthly income of Rs.3, 500 and above. With a loan tenure upto 36 months, the company will also finance purchase of second-hand consumer durables. It has tied up with 22 manufacturers for private label financing.
While CitiFinancial will soon increase its branch network to 70 from its present 21, the company also plans to extend support to consumer durable dealers in the form of joint promotions and inventory finance.
When asked whether the branch premises would also house Citibank ATMs, he replied in the negative. He said the company, on the other hand, would cross-sell the group's financial products.