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Thursday, Feb 14, 2002

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Cholamandalam experiment with franchisees pays off

M. Ramesh

CHENNAI, Feb. 13

CHOLAMANDALAM Investment and Finance Company Ltd (Cifco) had decided at the beginning of the year that it would accelerate its geographical spread of business by a varied distribution channel — franchisees. "It was a first for the NBFC industry," stresses Mr M. Anandan, Managing Director, Cifco.

This, the company thought, was a good way to step up coverage on par with its peers in the industry, such as Sundaram Finance which has 90 branches across the country and Ashok Leyland Finance, which has 140. Cholamandalam has 35 branches, six of which were added last year.

Since April, Cifco has appointed 45 franchisees and expects to have 20 more before the year is out. Thus, with 35 branches and 65 franchises, Cifco hopes to be operational from 100 locations at the beginning of next year, not counting the 100-odd direct selling agents (DSAs).

This gambit has paid off, according to Mr Anandan. About 15 per cent of disbursements of around Rs 750 crore during April-December of 2001 came from franchisees.

For the nine-month period ended December 31, 2001, Cholamandalam has reported `income from operations' of Rs 146.40 crore (Rs 116.61 crore in the same period last year) and a net profit of Rs 12.76 crore (Rs 11.46 crore).

Mr Anandan said Cholamandalam had structured its distribution in a `hub and spoke' fashion, the hubs being the company-owned branches and the spokes, the franchisees and DSAs. Through the hubs, the company would exercise control over the others.

Besides, each cluster of franchisees will have an auditor who will do the credit appraisal of a loan proposal strictly in conformity with the credit norms laid down by the company. They will also check the documentation. The company's or the franchisees' staff will do the `field verification' of the borrower.

Another unique feature of Cholamandalam's operations, Mr Anandan said, was the centralised processing. The central office maintains some 50,000 hire purchase agreements, which number is growing by around 5,000 every month. The office also has Rs 600 crore worth of post-dated cheques. The centralised processing of data is another means of keeping control over the nationwide distribution network, Mr Anandan said.

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