Poonawalla Fincorp to sell housing finance unit to TPG for Rs 3,900 cr

PFL to explore inorganic investments for business growth

Poonawalla Fincorp (PFL) will sell its housing subsidiary Poonawalla Housing Finance (PHFL) to Perseus SG, an affiliate of private equity group TPG Global, at a valuation of Rs 3,900 crore. The deal is subject to regulatory approvals.
 

The PFL board approved the deal on Wednesday.
 

The value unlocking of the housing finance subsidiary was one of the stated objectives in the company’s Vision 2025 statement. In line with that, PFL started the process by looking at part dilution and price discovery.
 

The company said it looked at various proposals, including those for a full stake buyout. After an exhaustive review, the board decided a complete stake sale would be in the interest of all stakeholders. The board approved the divestment of all 249.8 million shares of the housing finance company to Perseus SG for Rs 152.84 per equity share.

This represents a total equity value of Rs 3,900 crore, PFL said in a filing with BSE. PFL shares closed 0.41 per cent lower at Rs 302.1 apiece on the BSE.
 

PHFL’s assets under management rose by 31 per cent year-on-year (YoY) to Rs 5,612 crore by the end of September 2022.

HFC’s capital adequacy was 39.1 per cent, with a net worth of Rs 1,151 crore, at end of September 2022, according to an analyst presentation. This transaction would help PFL focus on maximising value creation by optimising resource allocation and increasing management focus on business needs.
 

Adar Poonawalla, chairman, PFL, said the finance company would continue to focus on its growth via tech-led businesses (like consumer and MSME lending) and a branch-lite model. Poonawalla Housing would follow its own differentiated path as a completely independent business.
 

Elaborating on the way forward, PFL said the company aspired 35-40 per cent year-on-year growth in assets under management over the next three years. The Pune-based NBFC looks to achieve a consistent return on asset in the range of 4-4.5 per cent.
 

Meanwhile, global alternative asset management firm TPG in a separate statement said in the near term, it will also infuse additional equity capital up to Rs 1,000 crore into housing finance unit to support growth.

TPG is backing the existing management team led by Manish Jaiswal, managing director and chief executive officer of PHFL.

With prudent underwriting and collection capabilities, it expects to maintain net non-performing assets (NPAs) to be below 1 per cent.
 

PFL is well capitalised (capital adequacy ratio of 44.9 per cent in September 2022) and has one of the lowest cost of borrowings among its peers.
 

Considering the company’s large capital base, it is poised to explore deep investments in technology and analytics through both organic and inorganic routes. This transaction (sale of housing finance unit) would further strengthen it for exponential growth over the next five to seven years, it said.
 

The company would continue to drive consolidation of its branches, manpower, and create an efficient structure in line with its growth strategy, it added.

KEY FACTS 
 

Rs 5,612 cr: Assets under management 

128: Branches 

Rs 1,151 crore: Net worth 

39.1%: Capital adequacy