Mahindra to invest Rs. 2 b in Ideal Finance | Sunday Observer

Mahindra to invest Rs. 2 b in Ideal Finance

The automobile industry will benefit from an economic revival which could be expected following the elections due this year and also gain from the country’s strategic location in the region, Chairman, Ideal Finance and Ideal Group of Companies Nalin Welgama told the media at a ceremony to mark the launch of the joint venture between Mahindra Finance and Ideal Finance in Colombo last week.

“The global economic slowdown triggered by the US-China trade war and Brexit, could impact trade and finance negatively, but we are hopeful of a speedy economic revival next year with some stability restored in the country,” Welgama said.

The joint venture between Ideal Finance and Mahindra and Mahindra Finance Services Ltd. (Mahindra Finance), India’s leading non-banking finance company, focused on rural and semi urban markets, aims at serving the growing automobile market in Sri Lanka.

Mahindra Finance will invest Rs. 2 billion until March 2021 for a stake of up to 58.2 percent in Ideal Finance.

The joint venture will capitalise on Mahindra Finance’s 25-year expertise in the financial services domain and Ideal Finance’s domestic knowledge to build a vibrant financial services market in Sri Lanka.

“We have been able to convince Mahindra and Mahindra, a $ 20 billion company because of the high integrity, good governance, passion and transparency displayed in our business during the decade long partnership,” Welgama said, adding that the restriction placed by the regulator for deposit taking was due to the delay in capital infusion.

All Non Banking Finance Institutions (NBFIs) are required to have Rs. 2.5 billion in core capital by January 1, 2021.

However, the two companies looked optimistic on future business prospects with the vehicle market expected to revive soon.

“I welcome the timely entry of Mahindra Finance to Sri Lanka at a time when NBFIs are pressured by low economic growth and flagging vehicle sales. The partnership will help elevate Ideal Finance to Tier 1 category in a short span of time,” Welgama said, adding that the joint venture will not only help Ideal Finance but also the country.

The joint venture also aims at the vast SME sector of the country which contributes over 70 percent to its GDP.

Mahindra Finance Executive Director/CFO V. Ravi said the joint venture is a significant step in Mahindra Finance’s global strategy.

“We are happy to partner with Ideal Finance which has played a vital role in making Mahindra Finance’s presence strong in Sri Lanka. I am certain that Ideal Finance and Mahindra Finance together will build a leading fiancés services business in Sri Lanka which will be a gold standard for good governance in the NBFI sector,” Ravi said.

When asked about the real estate business of the company, he said Mahindra Finance will wind down its exposure to the real estate business.

Mahindra Finance is the only NBFI from India to be listed in the Dow Jones Sustainability Index in the Emerging Market category. The company was ranked eighth on the list of India’s best companies to work for in 2019.

Ideal Finance Ltd., a NBFI registered with the Central Bank commenced operations in 2012 focused on rural and semi urban sector. Its lending portfolio consists of commercial trucks, motor cars, three-wheelers, two-wheelers, gold and personal loans.