Barclays treks NBFC trail with Rank Investments acquisition
India’s non-banking finance companies (NBFC) segment appears to be increasingly attracting more foreign investors.
By TNN |
MUMBAI: India’s non-banking finance companies (NBFC) segment appears to be increasingly attracting more foreign investors.
After Temasek - the investment arm of the Singapore government and French bank, Societe Generale, it is now the turn of British banking group Barclays to take control of a local NBFC. The UK group is in the process of taking over a small Chennai-based finance firm- Rank Investments and Credits.
The total investments by the group in the NBFC are $7.5 m. The group has signed an agreement with the shareholders of Rank Investments who control 96% of the capital of the NBFC. Barclays is subscribing to fresh equity and preference shares, which will take its shareholding in the NBFC to 99.28%.
The transaction is subject to approvals from the Reserve Bank of India or from the finance ministry. Rank is an NBFC registered with RBI. Once the approvals are received, the group plans to inject fresh capital to increase its total investments in the NBFC to $50 m.
Barclays officials said, “This acquisition will enable the Barclays Group to expand the scope of its business in India to include services and products that a Reserve Bank of India- registered NBFC is permitted to undertake.
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This investment will, over time, involve a minimum equity capital commitment of $50 m and is in line with the group's stated objective of committing additional capital and resources to grow its footprint in India.''The group, a couple of months ago, had roped in Samir Bhatia, head of corporate and SME banking in HDFC Bank as MD of its retail and commercial banking in India.
Barclays is currently present in the country through Barclays Capital, its investment banking division. The group is now betting big on retail and small and medium enterprises in India.
Barclays officials had earlier said that it was looking at setting up a wholly-owned NBFC to target the SME business and was also looking at an acquisition in the NBFC space. The group is likely to use Rank to target the SME and retail banking in the country.
Foreign banks are keen on acquring controlling stakes in local NBFCs as currently there are no fetters on their branch expansion. Foreign banks like Citi and StanChart already have their wholly-owned NBFCs in India. However, for a commercial bank, there are restrictions imposed by RBI for issuing fresh branch licences.
RBI normally issues two to four branch licences to each foreign bank but restricts the total number of fresh licences given in a year to close to 20.
Last year, Asia Financial Holdings, a wholly-owned susbsidiary of Temasek, took over Chennai-based Dove Finance, which has now been recapitalised and renamed as First India Credit.
AFH has increased its stake to close to 98% now from 80% initially. It has already opened over 30 branches in Chennai, Thane in the outskirts of Mumbai and other cities.
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