Kirloskar to invest additional Rs 250 crore in NBFC arm, monetise land assets

Atul Kirloskar, executive chairman of KOEL, said they were a debt-free cash-rich company: “We had committed Rs 1,000 crore for the NBFC business as seed capital, of which we have invested Rs 750 crore already. We want to conservatively grow the book and will be investing the remaining Rs 250 crore into the company by March 2023.”

Manufacturing industry-focused Kirloskar Oil Engines (KOEL) on Friday announced it will be investing another Rs 250 crore in its non-bank finance company (NBFC) Arka Fincap. They also announced plans to monetise its 50-acre land bank in its base of Pune for its realty company Avanti Spaces.

The group has announced reorienting of businesses from B2B manufacturing engineering companies to solutions providing B2C companies. The companies have planned large investments over the next 2-3 years across all business lines. This includes a Rs 1,000-crore foray into the NBFC business with Arka Fincap.

Atul Kirloskar, executive chairman of KOEL, said they were a debt-free cash-rich company: “We had committed Rs 1,000 crore for the NBFC business as seed capital, of which we have invested Rs 750 crore already. We want to conservatively grow the book and will be investing the remaining Rs 250 crore into the company by March 2023.”

Arka is a subsidiary of KOEL and began operations with a seed capital of Rs 1,000 crore. It is focusing on structured term financing solutions for corporations and loans to MSME borrowers and the real estate sector. Arka Fincap will expand into retail lending and consumer finance.

Atul and his brother Rahul Kirloskar are “very patient with the capital” and are not in the game of expanding the valuations for the NBFC. The non-bank lender has borrowings of Rs 700 crore and has the scope to increase on the same.

The other consumer-facing business will be the realty company, Avante Spaces. Kirloskar said this company would monetise the land assets for the real estate business with first of the land parcels being developed in Pune. This 12-acre parcel will see two million sq ft mixed-use development with retail and commercial space.

KOEL, along with Kirloskar Chillers, Kirloskar Pneumatic, Kirloskar Ferrous and Kirloskar Industries, has refreshed the Kirloskar brand identity. The companies have inducted new leadership with Mahesh Chhabria leading Kirloskar Industries, Vimal Bhandari heading Arka Fincap, Vinesh Jairath leading the real estate business and K Srinivasan as MD of Kirloskar Pneumatic. RV Gumaste, Sanjeev Nimkar and Avinash Manjul continue to lead Kirloskar Ferrous Industries, KOEL and Kirloskar Chillers, respectively.

Atul Kirloskar indicated that there is headroom for the promoter family to raise debt from the bank, stating that as of end of FY21, it had a net worth of Rs 5,000 crore and a net profit of Rs 1,000 crore across the companies, with a zero debt.