GE Capital Services is all set to take over the Lalbhai group company Anagram Finance Ltd, In 1996-97, Anagram posted a turnover of Rs 257 crore and a net profit of Rs 35 crore and qualified as one among the top five finance companies in India. It may be remembered that GE Capital took over the prized SRF Finance last year from the Bharath Rams of Delhi. Anagram has 70 branches in India and has been focussing recently on truck finance. The Lalbhais control 70 per cent of its equity and were unwilling to relinquish their majority hold in the company till recently. But now it seems that the Lalbhais want to concentrate on their core business activity namely textiles and want to exit from the financial services business.GE Capital has a 55 per cent equity stake in Countrywide Finance which it set up jointly with HDFC for auto and consumer durable financing. If GE Capital acquires Anagram Finance, there may be a clash of interest with Countrywide Finance. At present GE Capital is a corporate finance companybut if it takes over Anagram Finance, it will enter into retail financing.
The company signed a MoU with SBI for entering into the credit card business. Two separate companies are being floated by them for marketing and processing. in the meanwhile Sebi has asked the company to furnish details of its acquiring 30 per cent equity stake in Paam Pharmaceuticals because of a loan default. If Sebi feels that the acquisition comes under the purview of the takeover code, it may ask the company to make an open offer to the shareholders of Paam Pharmaceuticals. But GE Capital has made a public announcement to auction its 30 per cent stake to the public.
When the company itself admits owning 30 per cent stake in Paam Pharmaceuticals, it is not known why Sebi is wasting time in asking for the details of acquisition instead of straight away asking the company to make an open offer to the public. In fact Sahara India was asked to make an open offer to the shareholders of Indiana Dairy Specialities Ltd. When the formeracquired 26 per cent of the equity of the later because of a loan default. When there is a precedence, Sebi should have straightaway asked GE Capital to make an open offer.
GE Capital does not source its funds from the fixed deposit market. Most of its funds are tapped through the private placement market. Therefore, it is not much affected by the recent guidelines laid down by the Reserve Bank of India for non-banking finance companies. But Anagram Finance is in trouble as it has to return a portion of its deposits to the public before December in order to comply with the rules.
In order to enter into consumer financing segment, GE Capital floated a separate company styled as GE Capital Transport Finance India Ltd, but this company is not a new one and is only a rechristened version of SRF Finance, 70 per cent of which was acquired by GE Capital last year. SRF Finance has not only changed in name and management but has also changed from a multi faceted non-banking finance company to a single businessvehicle finance company. It has even dropped its plans for setting up an asset management company. It has plans to sell off its stock broking subsidiary.
Anagram is not the only company which will compete with Countrywide Finance in vehicle financing segment. Already SRF Finance under the new name of GE Capital Transport Finance India Ltd is also competing against Countrywide Finance.
In fact Countrywide Finance itself has set up a captive auto finance firm called Maruti Countrywide Auto Financial Service. GE Capital held talks with the Madras-based Overseas Sanmar Finance Ltd, for setting up a joint venture financial services company. Informed sources in Madras say that GE Capital is also likely to pick up an equity stake in Overseas Sanmar. In fact, for quite some time, the foreign-based GE Capital had been scouting for a reputed Indian finance company with low levels of non-performing assets to be its partner. Overseas Sanmar fits the description perfectly.
GE Capital is a fully owned subsidiary ofthe US-based GE Capital. Already it has set a record in India when it raised Rs 40 crore debt recently with a coupon rate of only 11.25 per cent. This is the lowest rate any finance company has offered for its debt in India. This shows the financial muscle power of the company. The debt paper had an 18 month tenure with no call and put option and the instrument was rate AAA by Crisil. The entire debt was raised through book building route.
However, the company raised debt in the previous financial year at a high interest rate of 18 per cent because of liquidity crunch in the economy.
GE Capital is also eyeing on picking up a stake in Karvy Consultants. Karvy Consultants is a Hyderabad-based share registrar company. Jardine Fleming holds a 29 per cent stake in Karvy. Reliance Industries is one of Karvy's clientele. It has a paid-up capital of Rs 3 crore. GE is one of the largest financial data processors in USA and the acquisition of Karvy will help them to extend their business in India.
But everythingdepends on how Jardine Fleming views this, GE Capital is one of the largest finance companies in the world with a net earning of $2.8 billion in 1996. With this muscle power, it will be a cakewalk for the company to convince Jardine Fleming about its intentions. In fact the company is not interested in hostile takeovers at all Jeffrey S Werner, senior vice president, corporate treasury and global funding operation of GE Capitals made it very clear that the company was interested only in friendly takeovers in India.
This year the company has one advantage as it can borrow bank money now. Last year it was not permitted to have access to bank funds. Its consortium of banks include ABN Amro Bank as lead banker, Citibank ANZ, Bank of America and Societe Generale. The company has dropped its plans to set up housing finance business in India. GE Capital has an equity base of Rs 242 crore and assets of Rs 805 crore. Capital is not a problem for the company. In fact, its parent company GE Capital Corporation of USAhas executed a `keep well' agreement with its Indian subsidiary to guarantee its obligations upto $200 million. The company has its parent to guarantee its liabilities. It has a huge capital base compared to other Indian NBFCs. It has the backing of the foreign institutional investors and also the foreign banks in India. What more do you need to succeed in executing `friendly takeovers'?
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
