GE Money finds few takers for its loan portfolio

MUMBAI: GE Money India is learnt to have found no takers for its wholly-owned personal loans and mortgages portfolios, with the interested parties quoting nearly half of the company’s expectation. The bidders say this could eventually lead to the proposed divestment plan being scrapped.
Sources close to the development said the bidders recently informed Morgan Stanley, advisor to GE Money India, that their valuations are in the range of $150-200 million. GE Money had pegged the base price of these two businesses at $400 million — the amount it had invested in them — and was looking for a premium over this.
They said the businesses, which are on the block, lost their charm in the aftermath of the US subprime crisis and subsequent depreciation of personal loan and mortgage portfolios across the globe. Portfolio quality has deteriorated for most players in India, with regulators clamping down on the aggressive methods of collection agents. Experts said the situation is unlikely to look better in a year or so.
“Under the changed scenario, the attraction for GE’s businesses could be their network. But we did not find merit in quoting more than $200 million for the network which we can built across the country in a year or so,” said a source close to one of the bidders. It has 180 offices in 120 towns, with 450 full-time employees and 2,600 contingent staff.
Another source said: “We are not very confident about quoting anything near to GE’s expectation as we believe delinquencies in most retail businesses in India are going up, with GE being no exception. In fact, that’s why big banks are slowly withdrawing themselves from the personal business.”
When contacted, the spokesperson for GE Money India told ET: “As mentioned in the past, we have received strong expressions of interest for a likely partnership for our wholly-owned personal loans and mortgages portfolios. The process of review is still underway and hence we will not be able to respond to speculations. GE Money remains steadfastly committed to India as a market for long-term growth.”
Code-named ‘Project Intrepid’, GE has put GE Money Housing Finance (excluding home loans distributed through a JV with Wizard Home Loans) and the personal loans business known as GE Money Financial Services on the block four months ago.
Nearly 40 companies showed initial interest, but a few firms including Tata Capital, Future Group, Indiabulls, the Aditya Birla Group and Carlyle carried out the due diligence. Reliance Capital had pulled out of the race citing ‘high asking price’.
GE Money India has a strategic arrangement with Australia-based Wizard Home Loans, a subsidiary of GE Money Worldwide. This strategic tie-up was announced in September 2007. Company officials had talked of a $200-million equity investment and of building $2-billion home loan portfolio by 2011.