Mumbai, January 29: Motor & General Finance Ltd (MGF) and AVCO Financial Services (AFS), a wholly-owned subsidiary of the US-based Textron Inc, have jointly set up a non-banking finance company - AVCO Financial Services India Pvt Ltd.The NBFC has a paid-up share capital of Rs 36 crore. Seventy five per cent of the equity has been brought in by AFS through a Mauritius-based investment company -- AVCO Financial Servcies (Mauritius) LLC. MGF has a 22 per cent stake in the venture, while three per cent is held by Tushar K Chopra, a former Citibank official. Chopra will head the new outfit.
MGF shareholders cleared the company's plans to invest in the venture at its annual general meeting. MGF has brought in Rs 7.52 crore as its share of equity. AFS will venutre into auto finance, which would result in direct competition with MGF. However, MGF officials felt that there would be no clash of interests between the two companies. "MGF already has a brand equity in the north and enjoys tremendous customer loyalty,so there will not be any instance of our customers moving away to AFS," said a source at MGF.
The foreign partner has appointed two nominees, Eugene R Schutte and George Antony Travers, on the board of the new entity. MGF is represented by its wholetime director, Rajiv Gupta. The new firm hopes to clock disbursements amounting to Rs 100 crore during the current year.
"We have been speaking to a number of foreign banks who have agreed to extend credit limits to the new company," said sources.
MGF, which is one of the largest players in the truck finance business in north and south India, took a big hit in 1996-97 after it had to provide Rs 8.63 crore towards lease equalisation on leased assets as recommended by the Institute of Chartered Accountants of India (ICAI). The NBFC posted a net profit of Rs 12.13 crore in 1995-96, which fell to Rs 4.65 crore in 1996-97 on account of the huge provisioning requirements.
The recent NBFC guidelines announced by the Reserve Bank of India is likely to impact MGF'soperations since the firm has deposits in excess of three times its networth, despite the company not having a AAA rating.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
