Mar 29, 2000|
Tata Finance on its way to universal banking
Tata Finance is all set emerge as a universal bank in future. It has recently announced its decision to set up its housing finance subsidiary "Tata Home Finance" by the first week of May. It also has plans of opening a credit card subsidiary in due course of time.
Tata Finance, a non banking financial company operates in auto finance, construction equipment finance, long term lending to corporates, lease/hire purchase facilities, trade bills of exchange etc. It reported a turnover of Rs 5.5 bn for FY99. During FY99, Tata Finance formed a joint venture with American Express International for the purpose of carrying out foreign exchange services and allied activities.
Tata Finance also has plans to acquire or merge with businesses in forex, and non-banking financial companies within the next one year. To finance its expansion plans the company has recently raised Rs 480 m through private placements, and plans to raise Rs 1 bn more in future through private placements.
As the company is keen to get into banking it has plans to slowly gear up towards this by getting into housing finance, forex, credit cards etc. Its banking foray would eventually depend on clearances from the regulatory authorities.
Traditionally banks have been lending to corporates for working capital purposes and development finance institutions and NBFCs have been lending towards project financing. However recently many NBFC and financial institutions have become aggressive on retail lending as this is a strong growth area.
This move in the financial sector will lead to consolidation and result in a fewer number of wholesale banks. The concept of "Universal Banking" is slowly finding its place in the Indian financial markets as the roles of banks, financial institutions, NBFCs are now merging and they are slowly treading into each others turfs.
The Tatas have in the past been concentrating on their business of steel, commercial vehicles, tea etc. However now the group's focus is increasing towards its service businesses like software and now banking. Given their trusted brand name, Tata Finance's foray into banking should be easy.
Earlier Tata Finance was not covered aggressively by analysts, however due to its performance and expansion plans analysts have turned positive on the stock.
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