Home / Industry / Banking /  Ashok Leyland finance arm raises Rs250 crore through rights issue

Mumbai: Hinduja Leyland Finance Ltd (HLF), the commercial vehicle financing unit of Ashok Leyland Ltd, has raised Rs250 crore (about $37 million) from existing investors—Hinduja group entities and private equity investor Everstone Capital—through a rights issue, two people aware of the development said.

HLF is owned by Ashok Leyland and other entities of the Hinduja Group.

“The rights issue saw participation from all existing shareholders including Ashok Leyland Ltd and Everstone Capital. Ashok Leyland being the largest shareholder, invested around Rs145 crore through the rights issue," said one of the two people cited above, requesting anonymity, as he is not authorized to speak to reporters.

Ashok Leyland held a 57.43% stake in HLF as of March 2016. All Hinduja group entities together owned around 84.63%, while Everstone Capital held a 14% stake.

In July 2013, Mint reported that Everstone had invested Rs200 crore in Hinduja Leyland Finance Ltd. Everstone is an India- and Southeast Asia-focused private equity and real estate investment firm with assets under management of $3.3 billion.

According to the first person cited above, the funds raised through the rights issue will help improve the lender’s capital adequacy ratio. “At the start of the current financial year, the company’s capital adequacy ratio stood at a little over 16%, as against the statutory requirement of 15%," he added. At the end of the financial year 2014-15, the firm’s capital adequacy ratio stood at 19.67%.

The rights issue was necessitated because of a delay in the company’s initial public offering (IPO) in view of the impact of the government’s move to replace high denomination currency notes, said the second person cited above, also requesting anonymity.

“They received Sebi’s approval for the IPO almost seven months ago in June last year, and the company was initially planning to wrap up the IPO by December. However, the plan was delayed due to demonetisation and its impact on the markets and consumer sentiment," he said. HLF’s Sebi approval is valid until June this year.

In March 2016, HLF filed its draft red herring prospectus (DRHP) with the Securities and Exchange Board of India (Sebi). HLF planned to raise primary capital to the tune of Rs500 crore through the IPO, according to the draft prospectus. Everstone Capital also planned to sell part of its stake through an offer for sale in the IPO

Including the primary offer and the offer for sale, the total size of the IPO is expected to be around Rs700 crore, Mint reported. Everstone declined to comment.

“We have raised funds through a rights issue to improve the capital adequacy ratio," said S. Nagarajan, managing director at Hinduja Leyland Finance, adding that the company continues to work on its IPO.

The company was incorporated in 2008 as a non-banking financial company with the Reserve Bank of India. It provides customized finance for utility vehicles, tractors, cars and two wheelers among other vehicles, focusing on the semi-urban and rural sector.

For the year ended 31 March 2016, HLF’s revenue grew by 41% to Rs1,145.69 crore from a year earlier, documents filed with the registrar of companies show. In the same period, profit grew 34.5% to Rs150 crore.

In 2015-16, HLF witnessed a 37% growth to Rs7,075 crore from the previous year’s disbursement of Rs5,125 crore. Assets under management (AUM) grew by a little over 50% to Rs10,001 crore, the documents show.

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