Financial Daily from THE HINDU group of publications
Tuesday, Aug 31, 2004
Financial Daily from THE HINDU group of publications Tuesday, Aug 31, 2004 |
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Money & Banking
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Financial Services StanChart inks factoring deal with Bharat Forge C. Shivkumar
Mr Chris Low
Bangalore , Aug. 30 STANDARD Chartered Bank has concluded a factoring deal equivalent to $25 million for the Pune-based Bharat Forge Ltd. Speaking to Business Line, Mr Chris Low, Chief Executive of StanChart India region, said that the entire deal was done on a non-recourse basis. This implied that StanChart had assumed the credit risk on its books. Factoring involves purchasing receivables of businesses by a bank/financial institution for funding working capital requirements. Mr Low said that this was the first time that such a large deal was done on a non-recourse basis. Traditionally discounting of bills by banks has always been done on a "with recourse" basis. He said that StanChart proposed to expand the factoring business . Moreover, all the factoring business done in the country has all been small tickets. He, however, declined to reveal the customer in whose name the bills were drawn and the discounting rates applicable in this deal. But discounting rates in such deals are dependent on the customer's credit ratings. Bills drawn on customers with high credit ratings would, therefore, command the lowest discounting rates. Bharat Forge makes castings and forgings for the automotive industry and is a global supplier. Almost 55 per cent of the Bharat Forge exports come from the US sources and another 22 per cent from China. StanChart, he said, intended to focus on this business in the coming years, he said adding this was in view of the export pick-up. Besides, this would also serve the large working capital requirements of domestic corporate entities including those in the small and medium sectors, who would otherwise have to raise funds at very high costs, he said. For expanding the factoring business, StanChart was also open to inorganic growth, he said. For the purpose, StanChart was prepared for equity tie-ups with some of the domestic factoring companies or even outright acquisition of portfolios. "We can even consider joint ventures for such operations," Mr Low said. Referring to StanChart's operations in India, he said that the bank intended to open another 10 branches in about 6 weeks' time. By the end of next year, Standard Chartered, he said, intended to have a presence in another 40 cities of the country. Currently, StanChart's presence is biased in favour of the metro cities of the country. For branch expansion, Mr Low said, "We could also look at acquisitions, if it served our strategic interests."
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