Tata Capital, the new financial services arm of the Tata group, is picking up 4.6% stake in DCB, hinting that the group may be ready for another play into the financial sector.
Tata Capital will pay Rs 85 crore for 4.6% in the bank
MUMBAI: Tata Capital, the new financial services arm of the Tata group, is picking up 4.6% stake in Development Credit Bank (DCB), hinting that the group may be ready for another play into the financial sector. The Tatas will invest around Rs 85 crore at Rs 105 per DCB share.
Praveen Kadle, executive director (finance and corporate affairs) at Tata Motors is reckoned to be the favourite to lead Tata Capital, did not comment.
“I am in a meeting,” Kadle told DNA Money. The group is not new to investment in banks. It had held a stake in the Central Bank of India before the bank was nationalised in 1969 along with 13 others.
Gautam Vir, MD & CEO of DCB, a bank that caters to small and medium scale companies, said, “At this point in time, they (Tatas) have come in as financial investors. We cannot speak of the future yet.” Vir said DCB’s investment bankers had shortlisted some names, and the bank culled it to five based on the profile of each investor. Apart from Tata Capital, four others picking up 4.6% each are Al Bateen Investment of the UAE, GRA Finance Corp, DCB Investments and India Capital Opportunities.
Currently Reserve Bank of India (RBI) regulations do not permit Indian companies to dabble in the banking sector. But the investment could be a long-term play for the venerated business house, because the Reserve Bank of India is scheduled to relax banking norms in 2009.
DCB, on the other hand, has been wanting to strengthen its balance sheet, said honcho Vir.After the fresh infusion of Rs 310 crore through this stake sale, the bank will have a capital adequacy ratio of 18%. That’s good enough for DCB to grow its portfolio aggressively.
Tata Capital is yet to formally announce a plan of action. Sources say the plan is to invest Rs 5,000 crore in the next 4 to 5 years.
Reports earlier suggested that the Tatas have hired Boston Consulting Group to prepare a roadmap for its entry into financial services including the capital market, merchant banking, housing, auto and other retail finance.
DCB said if RBI approval is not received wholly or partly for any of the proposed investors, the DCB board shall have the “power to identify and negotiate with one or more of the investors.”
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