DBS Bank to buy 37.5 per cent in Cholamandalam Investment Finance

17 June 2005

The agreement was signed in Chennai by Jackson Tai, vice chairman and CEO of DBS Group Holdings, and M A Alagappan, chairman of CIFCL. The transaction is subject to regulatory and shareholder approvals.

DBS Bank and the Murugappa Group will be equal shareholders in CIFCL, one of India's largest domestically-owned non-banking financial companies. The Murugappa Group, a Rs6,500-crore conglomerate with diversified interests in agro industries, engineering, finance, insurance and bio-products, currently owns 55 per cent of CIFCL principally through Tube Investments of India Ltd (TI).

The Rs38.01-crore equity-based Cholamandalam Investment, a leading non-banking finance company, (NBFC) is part of the Chennai-based Murugappa group. Last fiscal the company grossed a total income of Rs230 crore and a profit of Rs30.83 crore on an asset base of Rs1,959 crore.

Detailing the deal signed with DBS Bank, Alagappan said that the Singapore bank's investment will be in three stages. Firstly it will buy 15.1 per cent from the group company Tube Investments of India Limited (TI) that holds nearly 55 per cent.

In line with the laws, DBS Bank will make an offer to buy back the 20 per cent shares held by the public. "Subsequently a preferential offer will be made to DBS Bank so that its total stake in Cholamandalam Investment comes to 37. 5 per cent. The quantum of preferential issue will depend on the shares the bank gets as a result of the public offer."

In all, the DBS Bank is expected to invest up to Rs228 crore on the basis of the value of the franchise. This amount represents a price multiple of 1.82 times of the company's book value as on 31st March 2005.