Mahindra & Mahindra Financial Services Ltd has agreed to acquire a majority stake in Sri Lankan non-banking financial company Ideal Finance Ltd, the company said in a stock-exchange filing on Tuesday.
The Mumbai-headquartered company said it would acquire up to 58.20% stake of Ideal Finance for LKR 200.30 crore (approximately $ 11.25 million, or Rs 80.77 crore at current exchange rates).
Mahindra Finance, which is a part of the Anand Mahindra-led Mahindra Group, said it has received the requisite approvals from the Reserve Bank of India for the investment. The firm expects the transaction to be completed by March 2021, following which Ideal will become a subsidiary of the company.
Ramesh Iyer, vice-chairman and managing at Mahindra Finance, said, the Sri Lanka market has the potential for long-term growth. “Ideal Finance with its knowledge, highly experienced team, and widespread network is the right partner to help us create a leading financial services company in Sri Lanka,” Iyer added.
Separately, Ideal Finance chairman Nalin Welgama said the partnership with Mahindra Finance would help it become a Tier I company, despite the pressures being faced by non-banking financial institutions in Sri Lanka due to slower economic growth and dropping automobile sales.
Colombo-headquartered Ideal Finance began its operations in March 2012. It is a registered finance company that caters to the micro, small and medium enterprise segment. The company claims to have an asset base of LKR 4.4 billion, with an equity base of LKR 1.1 billion. The company has ten branches in various parts of the country, with a staff strength of 142.
News of Mahindra Finance’s move comes after the International Finance Corporation in April proposed a debt investment of up to $75 million (Rs 525 crore) in the non-bank lender. The World Bank’s private arm said the investment would help the publicly-listed company augment its lending to micro, small and medium enterprises.
IFC said that–apart from the three-year senior, secured debt investment–it may also mobilise additional funding from other investors for the company. The institution has backed several other Mahindra group companies in the past.