LAUGFS Holdings into financial services; to buy 67% of Softlogic Credit for Rs. 103.6 m

Tuesday, 2 October 2012 00:52 - - {{hitsCtrl.values.hits}}

LAUGFS Holdings Ltd., as part of further diversification, is to buy a 67% stake in Softlogic Credit Ltd. for Rs. 103.6 million.

The stake amounts to 5.1 million shares and the price works out to Rs. 20.30 per share. The investment in Softlogic Credit has been stated at Rs. 76.5 million or Rs. 15 per share in the Softlogic Holdings’ FY12 accounts.

Previously Softlogic Capital Plc, a subsidiary of Softlogic Holdings, had entered into a sale and purchase deal with Forbes Capital for the sale of 67% in Softlogic Credit for Rs. 100 million.

The fresh deal with LAUGFS suggests the previous arrangement had not gone through.

Softlogic said a share sale and purchase agreement was signed with LAUGFS Holdings on Friday and the deal will go through upon Softlogic Credit Ltd., obtaining all necessary regulatory and shareholder approvals.

Softlogic Credit is engaged in micro lending and via its acquisition LAUGFS is expected to tap prospects within the financial services sector. LAUGFS Holdings has sprawling business interests, with Group activities spanning LP gas, petroleum fuel distribution and sale, import, distribution and sale of lubricants, heavy engineering, vehicle emission testing, leisure and hospitality, consumer retail and bottled water, tea trading, restaurant chains, property development and real estate, manufacturing of salt and salt based chemicals, manufacture and export of industrial solid tyres, and providing higher education.

Softlogic Group has a growing financial services business, including Softlogic Finance, Asian Alliance, Softlogic Stockbrokers, and Softlogic Asset Management, under Softlogic Capital.

Revenue for the sector in FY12 grew by 430% to Rs. 3.17 billion as against Rs. 597 million in FY11. EBIT was only Rs. 45 million down from Rs. 161 million. Revenue was boosted by the acquisition of Asian Alliance Insurance, but the financing cost of holding insurance company resulted in an unfavourable bottom line. The investment in AAI also resulted in the sector’s liabilities growing by 257%.