Nairobi Securities Exchange stock:
Sidian Bank, which is 67.5% owned by Centum Investment Company Ltd (NSE:ICDC), recently entered into a multibillion shilling loaning deal with taxi services company Uber. Under the deal, Sidian will extend cheap car loans to Uber drivers, thus allowing the lender to grow its loans book and Uber to modernize its fleet.
Details of the deal
Sidian will allocate up to Sh10 billion specifically to fund Uber drivers toward the purchase of a car that they will use for taxi services. Drivers can apply for up to Sh1.5 million in car loan from Sidian under the agreement and the amount will be repaid in three years. To qualify for the loan, the driver making the application is required to make a down payment of 10% of the loan sought.
The advantage for drivers under the Sidian-Uber loan deal is that they will enjoy cheaper credit. Specifically, Sidian will loan the drivers at an annual interest rate of 10.5% compared to the prevailing average lending rates of 18%.
Although not revealed, it seems Uber is hoping that the loan arrangement with Sidian will help it attract more taxi drivers to its network and possibly douse market opposition against its innovative taxi solution. Uber provides software that simplifies access to on-demand taxi services.
Sidian will allocate up to Sh10 billion specifically to fund Uber drivers toward the purchase of a car that they will use for taxi services. Drivers can apply for up to Sh1.5 million in car loan from Sidian under the agreement and the amount will be repaid in three years. To qualify for the loan, the driver making the application is required to make a down payment of 10% of the loan sought.
The advantage for drivers under the Sidian-Uber loan deal is that they will enjoy cheaper credit. Specifically, Sidian will loan the drivers at an annual interest rate of 10.5% compared to the prevailing average lending rates of 18%.
Although not revealed, it seems Uber is hoping that the loan arrangement with Sidian will help it attract more taxi drivers to its network and possibly douse market opposition against its innovative taxi solution. Uber provides software that simplifies access to on-demand taxi services.
Where is the source of the money?
Centum Investment Company Ltd (NSE:ICDC) can be seen starting to flex its muscles as the majority owner of Sidian. The Sh10 billion that Sidian will extend to Uber drivers as car loans will come from Centum. For background, Centum owns Sidian through its 100% subsidiary called Bakii Holdco Limited. Such complex ownership arrangement is designed to satisfy regulatory requirement.
Centum Investment Company Ltd (NSE:ICDC) can be seen starting to flex its muscles as the majority owner of Sidian. The Sh10 billion that Sidian will extend to Uber drivers as car loans will come from Centum. For background, Centum owns Sidian through its 100% subsidiary called Bakii Holdco Limited. Such complex ownership arrangement is designed to satisfy regulatory requirement.
How well does Sidian Bank perform?
Investors in Centum Investment Company Ltd (NSE:ICDC), which owns most of Sidian may be interested in finding out how the business performs. First, Sidian Bank is the new name of the lender that used to go by the name K-Rep Bank. As for the financials, Sidian reported a net income of Sh372.3 million in FY2015, indicating a 27.5% decline from the prior year. The management of the lender blamed a spike in interest expenses for the drop in profits in FY2015.
Investors in Centum Investment Company Ltd (NSE:ICDC), which owns most of Sidian may be interested in finding out how the business performs. First, Sidian Bank is the new name of the lender that used to go by the name K-Rep Bank. As for the financials, Sidian reported a net income of Sh372.3 million in FY2015, indicating a 27.5% decline from the prior year. The management of the lender blamed a spike in interest expenses for the drop in profits in FY2015.
Despite the pullback in net income, Sidian’s loan book rose by Sh2 billion to hit Sh12.5 billion. As a reminder, Sidian is betting on loan book growth to fuel improvement in its financial performance in the coming years. In the deal with Uber, the lender is hoping to serve some 10,000 Uber drivers. The reason the Uber agreement could prove lucrative for Sidian is that Uber has set standards that require drivers to own new cars to qualify to join its network. For example, your car must be a model of 2008 or later to be able to tap into Ubers network. That requirement has necessitates the need for drivers to access loans to modernize their most important tool of trade – the car.
Sidian owners
Besides Centum Investment Company Ltd (NSE:ICDC), which owns 67.54% of Sidian Bank, the lender is also owned 22% by K-Rep Group and 10.46% by other unspecified investors.
Shares of Centum Investment Company Ltd (NSE:ICDC) fell 1.78% during Friday’s trading to close at Sh41.50. Analysts at AIB Capital predict that shares of Centum will rise to at least Sh54.55 before the end of 2016. They analysts have a BUY rating on the stock.
Nairobi Securities Exchange stock:
Besides Centum Investment Company Ltd (NSE:ICDC), which owns 67.54% of Sidian Bank, the lender is also owned 22% by K-Rep Group and 10.46% by other unspecified investors.
Shares of Centum Investment Company Ltd (NSE:ICDC) fell 1.78% during Friday’s trading to close at Sh41.50. Analysts at AIB Capital predict that shares of Centum will rise to at least Sh54.55 before the end of 2016. They analysts have a BUY rating on the stock.
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