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Tata Finance poised to sell housing arm to IDBI

George Smith Alexander & Reeba Zachariah in Mumbai

Tata Finance is close to selling its home finance arm, Tata Home Finance, to the Industrial Development Bank of India as part of its restructuring drive.

It is also close to selling the credit card business, which had a card base of 67,500 on March 31, 2002, though sources declined to reveal the name of the would be buyer.

Officials of both IDBI and Tata Finance confirmed that talks on the home loans portfolio were in the final stages.

Tata Finance sources also added that options were still kept open with Standard Chartered Bank, in case the deal with IDBI fell through. However, Stanchart was not looking at taking over the entire loan portfolio but was only interested in cherry-picking, based on its internal risk assessments.

IDBI had earlier walked out of the talks with the Tata group after the Tatas had insisted on tagging the parent Tata Finance also with Tata Home Finance, IDBI sources said. They added that credit rating agency ICRA has already done the due deligence for the home loans business.

Tata Finance holds a 63 per cent stake in Tata Home Finance with the remaining 37 per cent being held by UK-based Abey National PLC. The Tatas invested Rs 30 crore (Rs 300 million) in the home finance subsidiary and expect to sell it on a no-loss basis.

Sources added that ICRA did a supplementary due deligence as the home finance portfolio had grown in the intervening period. IDBI has also initiated talks with Abey National. Abey is also looking at a partner for the venture, as it does not want a 100 per cent stake. The UK major is open to IDBI taking over the home loan portfolio and is not likely to opt for the exit route.

The company has 16 branches and had sanctioned Rs 343.9 crore (Rs 3.44 billion) in loans and disbursed Rs 226.2 crore (Rs 2.26 billion) for the year ended March 31, 2002.

The portfolio of the company is believed to be at more than Rs 350 crore (Rs 3.5 billion). The net income of Tata Home Finance was Rs 24.38 crore (Rs 244 million) on March 31, 2002. It had a profit after tax of Rs 988,000.

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