Non-banking finance company (NBFC) Shriram Finance is likely to seek regulatory approvals for selling entire stake in its housing finance arm by end of May and hopes to complete the deal by end of this fiscal year, Executive Vice-Chairman, Umesh Revankar, told Moneycontrol in an exclusive interview.
Shriram Finance needs to get clearance from the Reserve Bank of India (RBI), Competition Commission of India and National Housing Bank for the housing finance arm's sale to US private equity firm Warburg Pincus, Revankar added.
On May 13, the Board of Shriram Finance approved the sale of its housing finance subsidiary Shriram Housing Finance Limited (SHFL) to Warburg Pincus. Warburg Pincus will fully own Shriram Housing Finance through its affiliate Mango Crest Investment Ltd from all the sellers. The proposed transaction is valued at Rs 4,630 crore for equity and convertible instruments of SHFL. The transaction is subject to regulatory approvals.
After the announcement of stake sale on May 13, Revankar, in an exclusive interview, said that the Warburg Pincus will infuse Rs 1,000 crore in the company's housing finance arm post the completion of Rs 4,630-crore buyout to ramp up business operations.
“The investor will infuse around Rs 1,000 crore in the company for the future growth, over the deal value of Rs 4,630 crore,” Revankar said.
The company, in a release, said that following the conclusion of this transaction, Shriram Housing Finance will operate as a standalone entity, continuing to enhance value for its stakeholders as it preserves its heritage and mission to provide housing finance solutions to the under-served population of the country.
The existing management team of SHFL, led by Ravi Subramanian, Managing Director and Chief Executive Officer, will continue to lead the business.
Revankar added that after the completion of deal there will not be any lay off from the company because the shareholders want growth and the company’s AUM grew at rate of 56 percent of CAGR over the last 4-year period.
On December 15, Moneycontrol reported that Shriram Finance is revisiting options to unlock value in Shriram Housing Finance Ltd and has launched a process to sell a controlling stake in the subsidiary.
Parent Shriram Finance, which is mainly into commercial vehicle financing, owns 84.82 percent in Shriram Housing Finance, while 14.94 percent stake is held by San Francisco-based private equity player Valiant Capital Management. According to reports in March, private equity firm BPEA EQT had reached advanced negotiations to pick up a minority stake in the housing finance venture, but the talks did not proceed.
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