Majority of leasing firms raise capital

07/05/2014 06:07 AST

Majority of leasing and hire purchase companies in the country have reached the minimum capital requirement stipulated by the Central Bank of Oman (CBO), well ahead of its deadline.

The CBO, few years ago, asked leasing and hire purchase firms to raise minimum capital to OMR25 million by the end of 2016 from OMR20 million in 2012 in a phased manner — one million rial each year starting from 2012.

National Finance Company has raised its paid up capital to OMR25.7 million.

Robert Pancras, CEO of National Finance Company, said that his company came out with a rights issue in January, 2012 for raising OM7.5 million capital, which took the total capital to OMR25 million.

Subsequently, National Finance has issued stock dividend or bonus shares in March 2014 to the extent of 2.5 per cent, which took the capital to OMR25.6 million.

Aftab Patel, chief executive officer of Al Omaniya Financial Services, said that his company's capital base is higher than what is required by the CBO. Al Omaniya issued convertible bonds, which is converted into equity. Most of the finance companies have enhanced their capital base by convertible bond issue, bonus shares or right issue.

More stability

The reason for raising the minimum capital was to make leasing firms strong and stable, which will ensure confidence in these companies. Companies with large capital can withstand any market volatility and achieve better growth. "Additional capital will give more stability and capacity to lend.

The company will have a strong foundation," added Patel.

Sources in United Finance said that the company's paid up capital has touched OMR27.5 million. Now United Finance is seeking an approval from shareholders for raising authorised capital to OMR50 million.

Business prospects

Referring to the business prospects of leasing firms this year, Patel said that there has been a growth in demand for funds. An increase in employment both in private and government sectors has resulted in better demand for loan. Further, the development of major infrastructure projects has also aided growth in demand for borrowed money for acquiring equipment and for working capital requirements.

This, in turn, provides an opportunity to non-banking finance companies for equipment financing.

Patel expects the OMR870 million leasing and hire purchase sector to grow by 12-13 per cent this year in terms of credit.

Echoing a similar view, Pancras said that the industry has grown by 12-13 per cent in the first quarter and the growth looks likely to continue at the same pace for the whole of the year.

Times of Oman