The filing said that the proposed acquisition to acquire the entirety of the issued and fully paid share capital of Indra Finance will comply with the consolidation road map of the Central Bank and does not constitute a major transaction for the Commercial Bank in terms of Section 185 of Companies Act No.7 of 2007.
Analysts noted that this was the first major acquisition by Commercial Bank in many years. Indra Finance is a subsidiary of Indra Group of Companies founded 40 years ago and is today one of the biggest motor vehicle importers in the country bringing in between 1,500 to 2,000 vehicle units ranging from top end BMWs to relatively cheap Chinese commercial vehicles.
Indra is a Rs. 10 billion company with its finance business turning over about Rs. 2 billion a year.
Indra Finance was floated in May 2013 to provide leasing and hire purchase facilities to customers buying vehicles from Indra. However, many of them preferred to make their arrangements with the banks rather than with the importer’s finance company for reasons of price.
Mr. Saliya Rajakaruna, CEO of Indra and a former CEO of Nations Trust Bank, explained that Indra Finance did not directly mobilize deposits from the public as that was an area they preferred to keep out of.
"Our cost of mobilizing funds from the banks and elsewhere was higher than that of the banks which could therefore offer cheaper facilities. So 60% to 70% of our customers buying vehicles from us went to the banks for their leasing and hire purchase requirements,’’ he explained.
Discussions between Indra and the Commercial Bank about the disposal of the finance company had been ongoing from early this year and Commercial Bank was the first among the banks to announce the takeover of a finance company under the Central Bank’s measures for consolidation of the financial services industry.
Mr. Indra de Silva, the owner of the Indra group, is the fourth largest shareholder and the biggest individual shareholder of the Commercial Bank with a 5.53% stake as at March 31, 2014.
A low profile relatively young businessman, he has been known as a big shareholder of some of the best companies quoted on the Colombo Stock Exchange.
In addition to its core interest in motor vehicle imports and sales, the group is also into property development and operates 13 main branches, fully equipped workshops and spare parts dealerships with a net work of 40 exclusive dealers.