Hinduja Leyland Finance (HLFL), a subsidiary of commercial vehicle major Ashok Leyland, has filed a draft red herring prospectus with SEBI to raise capital for its future requirements.

The proposed public issue comprises a fresh issue of shares worth up to ₹500 crore by the company and a offer-for-sale of up to 2.19 crore equity shares.

The NBFC had plans to raise ₹600-700 crore last year, but said it was deferring the IPO plan due to market conditions.

With the medium and heavy commercial vehicle market staging a strong recovery and a bright demand outlook for the next two-three years, the company has decided to go ahead with its plan to tap the capital market for funds.

Leading commercial vehicle companies have started seeing a spike in capacity utilisation levels, and are drawing up huge capex plans to raise capacity to meet demand in the next few years.

Market opportunity

Rating agency Crisil expects the vehicle finance portfolio of NBFCs to grow 300 basis points faster over the three fiscals to 2020, clocking a compounded annual growth rate of 15 per cent, compared with 12 per cent seen in the past three fiscals.

“The market opportunity for NBFCs will stem from continued government investments in the roads sector, expected finalisation of the scrappage policy or the Voluntary Vehicle Modernisation Programme and higher Budgetary spends for the rural sector,” it said.

Ashok Leyland has about 62 per cent investment in HLFL, and loans to Ashok Leyland trucks form a significant portion of HLFL’s loan book.

In 2017-18, the company’s disbursements grew by 32 per cent at ₹12,029 crore (₹9,014 crore in FY17). Its total income stood at ₹2,060 crore (₹1,527 crore) and profit after tax was ₹239 crore (₹162 crore).

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