Hinduja Leyland Finance Limited (HLF), Ashok Leyland’s commercial vehicles financial subsidiary is planning to raise around INR650 crore by way of IPO. For this, the group has taken the services of five banks and plans to enter the market in the second half of next year.
Everstone Group, a private equity and real estate investment firm, is also an investor in Hinduja Leyland Finance. It plans to make a partial exit through the IPO. The company had invested around INR200 crore with 15% stake in the finance company.
Hinduja Leyland Finance has recently forayed into housing loans and expects to reinforce its capital base along with expanding its financing business. S. Nagarajan, managing director, Hinduja Leyland Finance, confirmed the firm’s IPO plans in an email statement to Mint business daily.
Robust financial performance
Incorporated as a non-banking financial company (NBFC) in 2008, HLF provides financing options for commercial and utility vehicles and focuses on semi-urban and rural area. Revenues rose from INR625 crore to INR814 crore for FY2013/14 and FY2014/15 respectively. In the same timeframe, net profit increased from INR81 crore to INR111 crore. In the previous fiscal year, the company’s capital adequacy rate was recorded at 19.67% as against the statutory requirement of 15%.
Although sales of light commercial vehicles saw a decline in the last year, higher sales of medium and heavy commercial vehicles (MHCV) kept the profits soaring. Helping MHCV volumes were also lifting of mining ban in some states, growth in rail haulage charges by Indian railways and the expectations of economic revival. However, certain categories like tractors saw a decline in demand due to scarce rainfall.
In future, demand for light commercial vehicles is also expected to increase as economic activity gathers pace. Light commercial vehicle loan category declined by 17% whereas medium and heavy commercial vehicles loan category faced a 22% growth in the previous year.
A total of 28 companies have received approvals to bring IPOs from the Securities and Exchange Board of India (SEBI) this year and 15 have successfully raised INR6,348 crore. This amount is more than the funds raised in the last two years when the IPO market was subdued.