JM Financial to consolidate debt and distressed credit businesses

The transaction, subject to regulatory and shareholder approvals, is expected to be completed within the next 3-6 months.

JM Financial Limited (JMFL) has announced plans to consolidate its holdings in the wholesale debt syndication and distressed credit sectors under a single platform, following approval from the Board of Directors.

The proposed transaction includes two significant acquisitions. JMFL will acquire a 42.99 percent stake in JM Financial Credit Solutions Limited (JMFCSL) for Rs 1,282 crore, increasing its total stake in JMFCSL from 46.68 percent to 89.67 percent.

Concurrently, JMFCSL will purchase a 71.79 percent stake in JM Financial Asset Reconstruction Company Limited (JMFARC) from JMFL for approximately Rs 856 crore, boosting JMFCSL’s stake in JMFARC from 9.98 percent to 81.77 percent . The net cash outflow of around Rs 426 crore for JMFL will be financed from surplus cash reserves.

The transaction, subject to regulatory and shareholder approvals, is expected to be completed within the next 3-6 months. This strategic move aims to pivot JMFL from an on-balance sheet business model to a diversified originate-to-distribute/syndication model across various asset classes.

“The proposed transaction shall align our corporate and capital structure, offering greater flexibility to optimize capital allocation and distribution of profits to our shareholders,” said Vishal Kampani, non-executive vice-chairman of JM Financial. “We foresee significant long-term growth opportunities emerging for our businesses and are well-positioned to leverage them in the evolving market scenario.”

On June 21, shares of JM Financial dropped by up to 5.7 percent, hitting Rs 82 per share, following a directive from the Securities and Exchange Board of India (SEBI). The regulator ordered JM Financial to cease accepting new mandates as a lead manager for public issues of debt securities until March 31, 2025, or until further notice.

SEBI's order clarifies that these restrictions apply exclusively to JM Financial's role as a lead manager for public issues of debt securities. The company's involvement as a lead manager for public issues of equity instruments and other activities remains unaffected.