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Saturday, February 11, 2006

M&M Financial IPO price band at Rs 170-200

Mahindra & Mahindra Financial Services has set Rs 170-200 a share price band for bids in its forthcoming initial public offering, IPO, a source familiar with the development said on Friday, reports Reuters.

The 20 million share issue by the finance unit of automobile maker Mahindra & Mahindra would raise up to Rs 4 billion (USD 90 million) at the top end of the price band.

The IPO, which will boost its capital adequacy in an economy, which is witnessing a surge in demand for loans, will comprise 10 million new shares and an offer of 10 million shares from the tractor maker.

Although its capital adequacy is comfortable at 16.1%, compared with central bank-mandated 12% for finance companies, the current fund raising would help it grow strongly in the next few years, the banking source said.

The IPO funds will be key for its growth in lending for purchase of tractors and cars in an economy growing at about 8%.

"We seek to position ourselves between the organised banking sector and local money lenders," the offer document said. "As a supplement to our lending business we started an insurance broking business through a wholly-owned subsidiary."

Mahindra & Mahindra Financial, which mainly funds vehicle purchases, had a total income of Rs 2.55 billion for the half-year ended September 2005 and net profit of Rs 449.4 million.

It has also expanded the number of branches to 225 from 195 in the last three years to March 2005 and that boosted its customers to more than 300,000 from about 160,000, the offer document said.

The IPO price band is around the Rs 190 a share which private equity firm ChrysCapital LLC paid when it bought 3.16 million shares, or 4.2% of the company, last month.

After the IPO, ChrysCapital's holding will fall to 3.7% and Mahindra & Mahindra's stake will go down to about 70%.

The offer, managed by Kotak Mahindra Capital Company and ABN AMRO Securities, constitutes 23% of the post-issue equity.

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