Thursday, 17 July 2014 00:00
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Less liabilities but a strong foothold in motor leasing biz a key reason for selection – industry analysts
Indra Traders proprietor is single largest individual shareholder of COMBank with 5% stake
Commercial first in top banking league to announce acquisition under CB’s consolidation policy drive
Private sector industry giant exploring takeover of more finance companies
Commercial Bank disclosed yesterday that it intends to fully acquire the unlisted Indra Finance Ltd., for Rs. 870 million.
The deal is subject to relevant statutory and regulatory approvals and COMBank being satisfied of the financials submitted by Indra Finance, which is a subsidiary of motor trade fame Indra Traders.
Commercial Bank said in the meantime it is carrying out a due diligence of Indra Finance Ltd.
The acquisition complies with the consolidation road map of the Central Bank.
The announcement didn’t reflect well in COMB’s share price yesterday. On a day when market was on the up, voting shares of COMBank closed at Rs. 142.10, down by Rs. 2.90 though it touched an intra-day high of Rs. 145.
However the planned local acquisition by COMBank is first in many years.Analysts noted Indra Finance was a good fit for the largest private commercial bank. Some years ago it had a leasing entity (Commercial Leasing) but divested it. Whilst plans on Indra were disclosed, analysts speculated that COMBank could be exploring several more finance companies as part of expansion and in tandem with Central Bank policy towards industry consolidation.
Incidentally, Commercial Bank was the first among the banking league to announce an acquisition under CB’s new policy environment.
The asset base and business volume of Indra is unknown since the entity is not quoted on the Colombo Stock Exchange but industry analysts noted Indra is well managed and had lower liabilities since it wasn’t too focused on deposit mobilisation.
Indra Finance was registered as a finance company by the Central Bank in May 2013. It is part of Indra Group, which is strong on the motor trade and big vehicle financing and leasing portfolio. Its proprietor Indra Silva incidentally is the fourth largest shareholder and the biggest individual shareholder of Commercial Bank with a 5.53% stake as at end March 2014.
This facet may be one of the reasons why COMBank had disclosed the move though the deal does not constitute a major transaction as defined in Section 185 of the Companies Act for Commercial Bank.
Indra Group is also a customer of Commercial Bank. He is also a high net worth investor in the stock market with a select blue chip portfolio.
Indra also has interests in property development. In the motor business, Indra Traders has 13 main branches, fully-equipped workshops, spare part dealers and 40 exclusive dealers.
