Indian giant Mahindra ups stake in Ideal Finance, makes it a subsidiary

• Buys 20% shareholding to move up to 58% after having entered SL in August 2019
• Completes Rs. 2 b investment 
• Pioneering shareholders of Lankan finance company Ideal Holdings, Motors and Viraj Malawana sell down
• In FY21 IFL saw income grow by 9% to cross the Rs. 1 b mark
• Pre-tax and post-tax profit up by over 70% to Rs. 288 m and Rs. 184 m respectively

Indian giant Mahindra & Mahindra Financial Services last week completed the acquisition of 20% additional equity stake in Sri Lanka’s Ideal Finance from existing shareholders thereby increasing its stake to 58.2%

Following the move, Ideal Finance has become a subsidiary company of Mahindra Finance. The Lankan entity is the second subsidiary of MFS with the other being Mahindra Finance USA, LLC.

Mahindra Finance entered Sri Lanka in August 2019 with an agreement with conglomerate Ideal Group to acquire up to 58% in stages in Ideal Finance with an investment of Rs. 2 billion.

Existing shareholders who sold down include Ideal Holdings Ltd., which initially held 51%, Ideal Motors (25%) and Viraj Malawana (11.56%) among few others.

India’s Economic Times said with the increase in stake Mahindra Finance has put together a strategy to make Sri Lanka a preferred market going ahead.

They said the joint venture will capitalise on Mahindra Finance’s 25-year expertise in the financial services domain and Ideal Finance’s domestic market knowledge to build a leading financial services business in Sri Lanka. The strategic investment in Ideal Finance was also described as a significant step in Mahindra Finance’s global expansion strategy.

Mahindra Finance is one of India’s leading non-banking finance companies. Focused on the rural and semi-urban sector, the Company has over 7.3 million customers and has an Assets Under Management of over $ 11 billion. The Mahindra Group is a $ 19.4 billion federation of companies and enjoys a leadership position in utility vehicles, information technology, financial services and vacation ownership in India and is the world’s largest tractor company by volume. It also enjoys a strong presence in renewable energy, agribusiness, logistics and real estate development. Headquartered in India, Mahindra employs over 256,000 people across 100 countries

Set up in 2012, Ideal Finance (IFL) is a non-banking financial institution registered with the Central Bank, with a clear focus on the rural and semi-urban sectors. Its lending portfolio consists of commercial trucks, motor cars, three-wheelers, two-wheelers, gold loans and personal loans.

During the financial year ended on 31 March, IFL saw its income grow by 9% to cross the Rs. 1 billion mark. Profit Before Tax jumped by 76% to Rs. 288.4 million and Profit After Tax also grew in a similar fashion to Rs. 184 million in FYT21. IFL’s FY21 results were aided by a strong fourth quarter with income growing by 19% and profits up by 118%.

Mahindra Finance is a leading vehicle and tractor financier and provides loans to SMEs and also offers fixed deposits. In India, Mahindra Finance subsidiaries include those engaged in insurance broking, rural housing finance, and asset management. Mahindra Finance is the only non-banking finance company from India to be listed on the Dow Jones Sustainability Index in the Emerging Market category.