Mumbai: Daimler Financial Services India Pvt Ltd, a unit of Germany’s Daimler Group, has decided to withdraw the proposed issuance of non-convertible debentures as planned on 12 December, 2019 due to unfavourable market conditions, the company said in a regulatory filing today.
The financial arm of the makers of Mercedes-Benz brand of premium cars had yesterday notified that the board of directors of the company propose to issue 1,500 non-convertible debentures of ₹10,00,000 each, thereby planning to raise about ₹150 crore.
The plan was to raise funds for the said amount on a private placement basis on 12 December, 2019, the company had notified.
Earlier in August, the company’s board of directors had approved issuance of up to 11,000 non-convertible debentures of ₹10,00,000 each, there intending to raise ₹1,100 crore in one or more tranches.
Besides financing dealers with a penetration rate of almost 100%, Daimler Financial Services India also funds passenger and commercial vehicles to its customers. Parent company Daimler AG is present in India via Mercedes-Benz India, which is the largest player in the domestic premium car segment, and Daimler India Commercial Vehicles Pvt Ltd (DICV), also a leading player in the CV segment.
For the half year ended 30 September, 2019, the company had reported a sharp rise in its write-off of financial instruments, thereby suggesting difficulty in recovering loans lent out to dealers and customers. The write-offs had increased from ₹22.53 crore in H1FY2019 to ₹87.48 crore in H1FY2020. This had also impacted its net profit for the period, which stood at ₹2.52 crore, as against ₹52.82 crore for H1FY2019.
Like its rivals such as Tata Motors Ltd and Ashok Leyland in the CV segment, DICV has been struggling to keep up on prolonged decline in demand, primarily caused by the economic slowdown, low availability of freight volumes and excessive carrying capacity created by the axle load norms introduced last year. Besides observing several no production days through August, September, October and November to align unsold inventory of medium and heavy commercial vehicles (MHCVs), the company had to grant additional vacation days to its permanent employees two months ago.