The Hindu Business Line : M&M holding in financial services arm to fall to 67 pc

Mr Anand Mahindra (right), Vice-Chairman & Managing Director, Mahindra & Mahindra, with Mr Bharat Doshi, Executive Director, at a press conference in Mumbai on Monday. - Paul Noronha

Mumbai , Feb. 13

MAHINDRA & Mahindra Financial Services Ltd (MMFSL) formally announced its initial public offering on Monday. The price band for the issue, which comprises 20 million equity shares of Rs 10 each for cash at a premium decided through the book-built route, has been fixed at Rs 170-200 per share.

The issue opens on February 21 and closes for bid/subscription on February 24. MMFSL is a subsidiary of Mahindra & Mahindra Ltd (M&M). Of the 20 million shares on offer, 10 million equity shares are a fresh issue and the balance 10 million represent offer for sale by M&M and other existing shareholders.

As of now, M&M has 89.8 per cent equity. Post issue, M&M's holding will dip to 67 per cent. "Sixty per cent of the issue will be available for allotment to qualified institutional buyers, of which 5 per cent will be allotted to mutual funds, 10 per cent of the issue will be available for allotment to non-institutional investors and the balance 20 per cent will be available for allotment on a proportionate basis to retail investors," an official statement said. MMFSL's shares will be listed on both the BSE and NSE.

"This is a significant milestone for the company. It is the end of a long journey but it is also the beginning of another one," Mr Anand Mahindra, Vice-Chairman & Managing Director, M&M, said at a press briefing. What had begun as a finance subsidiary engaged in selling M&M tractors and utility vehicles to the semi-urban and rural markets, has actually laid a "fat pipeline" into a huge market. "What they were doing was building the channel that leads into what would become the engine of growth for India," he said.

Mr Mahindra pointed out that the potential of MMFSL is evident from the fact that a greater share of rural income today comes from non-agricultural sources. Thus, there's a need for funds for consumption-related to non-agricultural agendas.

"If we believe in the India story, then you have to believe that the Indian rural markets have a greater growth story going forward," Mr Bharat Doshi, Executive Director, M&M, said. MMFSL, which started financing M&M vehicles in 2002, now also finances vehicles of other makes. Further, it is into insurance broking and distributes mutual fund products. The company has plans to enter housing finance and personal loans business, directly or through a subsidiary. About 55-60 per cent of its vehicle financing portfolio is made up of automobiles and 40 per cent comprises tractors. Its net NPA is in the range of 2.8-3 per cent, but write-off is still lower at 1-1.3 per cent, Mr Ramesh Iyer, Managing Director, MMFSL, said.

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M&M holding in financial services arm to fall to 67 pc