CDC Group to hold 15% in NBFC arm, have board seat: IIFL

India Infoline Finance has informed the Bombay Stock Exchange that the Board of Directors of the company has considered and approved a proposed investment of about Rs 1,000 crore by CDC Group in the company. After the transaction gets completed, the UK company will hold around 15 percent equity stake in the NBFC arm of the IIFL Holdings.Reacting to the news Nirmal Jain, Chairman of IIFL, said that the non-banking finance arm constitutes 70 percent of the business. "The NBFC is a wholly-owned subsidiary where the focus in on home loans," Jain said, adding that it is also targeting affordable housing.

"CDC brings a lot of goodwill," he said.

CDC will be a financial investor and they will have representation on the board, he said.Below is the verbatim transcript of Nirmal Jain’s interview to Latha Venkatesh on CNBC-TV18.Q: This looks like a big investment, India Infoline Finance is your NBFC wing, what part of your business is it of the entire group? A: NBFC accounts almost about 70 percent of our group’s business. That is one of the most significant businesses which also requires capital because this is one business where growth requires capital. This NBFC company also is a wholly owned subsidiary company which is housing finance company where focus is on home loan and now increasingly we are targeting smaller towns and affordable housing. So, incrementally we are targeting small home loans and as you know that our NBFC has other products include gold loans, commercial vehicles, small and medium enterprises. Q: What is the total equity capital of that company, you say that CDC will take 15 percent stake, what is the therefore total equity? A: Equity of that company is around Rs 2,000 crore, net worth if you ask.Q: And will be the assets under management.A: Our loan book is around Rs 18,000 crore, so if you look at the balance sheet size it will be around Rs 20,000 crore.Q: And what will CDC bring to the table. Is it only the money or is there something else in terms of board seat or expertise in other ways?A: No, in fact, CDC and we also go back a long way. So CDC was the first private equity investor in IIFL when we are a start up in 1999. They came in and now of course, the CDC has also evolved over years and at this point in time if you look at CDC’s other investments in India, then many of them like Equitas, Ujjivan have got small finance bank licences, so they have in microfinance institutions, so CDC has first of all is a good name it is a part of UK government. It is a developmental organisation, the objectives are developmental, but it has supported investments in India for long time and in terms of financial services it has a very good track record because most of its investments the companies have evolved and grown very well. I think it is not only a financial investment, but CDC does bring a lot of goodwill, credibility as well as expertise in this sector and particularly in the small and microfinance loans which will be the thrust of our growth.Q: Are you looking at CDC as only a financial investor or are you looking at them as a strategic investor and will take more help from them?A: They are a financial investor, but having said that, of course, they will have a representative on the board and in today parleys the financial investors also bring lot of value to the table. It is not that somebody has to be a strategic investor only to bring value to the table, but if you look at their track record and all the investments from Ujjivan, Equitas or their debt investment in Utkarsh all of them have good track record.Q: Since you are referring to Ujjivan and Equitas so many times, should I assume that you are also looking at a small bank licence at some point since Reserve Bank of India (RBI) is looking at putting it on-tap in probably the new future? A: To be honest we are too big to be small bank now; with Rs 20,000 crore balance sheet we can’t be a small bank. So, maybe RBI has said they will probably get universal banking licenses virtually on-tap so whenever they announce the guidelines we can take it to the board and evaluate whether it makes sense for us and if it is, then the board will have to take a view on whether we need to apply or not.