India’s Mahindra & Mahindra Financial Services Ltd will invest Rs. 700 million next month as part of a deal to take 58.2% stake of Ideal Finance Ltd, a subsidiary of Ideal Group.
India’s leading Non-Banking Finance Company (NBFC) - Mahindra Finance will invest a further Rs. 1,300 million in two installments in 2020 and March 2021 to finish off the deal with a total investment to Rs. 2 billion.
“We believe that the Sri Lankan market holds great potential for growth and we see a long term growth opportunity in this market and are committed to bringing in the required capital and expertise to fuel this growth,” Vice-Chairman & Managing Director, Mahindra Finance, Ramesh Iyer said in Colombo yesterday.
“The joint venture will capitalize on Mahindra Finance’s 25-year long expertise in the financial services domain and Ideal Finance’s domestic market knowledge to build a market leading financial services business in Sri Lanka,” he added.
He also said that Sri Lanka is the third country after the US to launch their financial unit. “This strategic investment in Ideal Finance is a significant step in Mahindra Finance’s global expansion strategy.”
“Mahindra Finance has fueled the entrepreneurial aspirations of over 6.2 million customers in over 370,000 villages in India, and manages an AUM of over USD 10 billion”. Chairman, Ideal Finance Ltd., (IFL) Nalin Welgama, said at a time where NBFIs are pressured by low economic growth and flagging vehicle sales, the timely entry of Mahindra Finance to Sri Lanka is a positive initiative.”
“They bring with them most invaluable sector exposure, vision and capital infusion to Ideal Finance which in turn would be lent mainly to local SME sector. This would in mainly for vehicle leasing but they would not only be confined to Mahindra vehicles.”
IFL has an asset base of Rs. 4.4 billion and an equity base of Rs. 1.1billion. “All NBFIs are required to have Rs. 2.5 billion in core capital by January 1, 2021 and with this partnership would enable Ideal Finance to be elevated to a Tier1 category within a short span of time.
Deputy Chairman, Ideal Group, Aravinda De Silva, said, “We believe this partnership will be instrumental in bringing a new dimension to the Sri Lankan NBFI sector which is yearning for consolidation, technology and governance for the past two decades.” Ideal Group is associated as the partner of the Mahindra Group in Sri Lanka for auto sector with their JV assembly plant in Matugama last week.
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