Indian Bank seeks partners for merchant banking and MF business

July 25th, 2010 - 2:45 pm ICT by IANS  

Chennai, July 25 (IANS) Indian Bank is in the process of inducting partners for its merchant banking and mutual fund arms and merging the housing finance outfit with itself, a top official of the public sector lender said.
“We are talking to both- foreign and domestic- parties to join hands with us for the merchant banking and mutual fund business. By September we will be signing the joint venture deal for the mutual fund business,” T.M. Bhasin, chairman and managing director, told reporters here.

He declined to name the companies with which the bank is talking to for partnership.

Asked about the stiff competition in the merchant banking space and why anybody would like to join hands, he said: “We see good potential in the government’s disinvestment plans.”

The Indbank Merchant Banking Services Ltd is on the revival mode earning Rs.19 crore and a before tax profit of Rs.2.3 crore last year. After adjusting for previous year’s losses, the net loss stood at Rs.1.6 crore.

For the year 2008-09, the company earned Rs.9.8 crore and a net loss of Rs.7.22 crore.

Apart from merchant banking, the company is into stock broking and is a depository participant.

Indian Bank holds 64.84 percent of the Rs.44.37 crore equity of the Indbank Merchant Banking and the balance is held by public and institutions.

On the other hand ,Indian Bank will be merging its housing finance arm, Indbank Housing, with itself.

The Rs.10-crore, equity-based Indbank Housing earned Rs.2.4 crore income and posted a net loss of Rs.1.6 crore last year.

“After write offs, Indian Bank will get housing loan portfolio of around Rs.76 crore,” Bhasin added.

Unlike many other public sector banks that have floated life and general insurance companies, Bhasin ruled out any such venture on the part of Indian Bank.

“One third of the premium earned by a life insurer has to be reserved. It is a capital-intensive business and the business may break even between 7th and 10th year,” he said.

Contended with the bancassurance (selling insurance policies of other insurers), he said around 800 out of 1,764 bank branches are involved in this activity and more branhces will be added over a period of time.

Meanwhile, the bank has entered into loan syndication activity to beef up its fee-based income.

“We found that while we lend the money, private banks and others coming to us with corporate loan proposals pocket the syndication fee. We decided to get into this activity ourselves,” Bhasin said.

According to him, the bank may not be in a position to lend to a project on its own due to various exposure limits and prudential norms. On the other hand, it can find other lenders to form a consortium.

On the bank’s exposure to infrastructure projects, he said: “Our infrastructure portfolio stands at Rs.14,000 crore. We lend to road, power and telecom projects. We would have lent around Rs.300 crore for road projects and Rs.2,000 crore for telecom sector. We have a commitment of Rs.5,000 crore for the power sector.”

However, the bank is keeping its hands off the 3G telecom business. “The players have just won the licence. They have to show us their business plan for us to take a call. We lend mainly on the basis of assets and revenue flow,” said Bhasin.

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