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UAE-based sovereign fund Mubadala Investment Company and Warburg Pincus are in talks with Shriram Finance to acquire a controlling stake in its subsidiary Shriram Housing Finance (SHFL).
Shriram Finance on Tuesday confirmed it was looking to unlock value in the housing finance arm to secure growth capital.
“We are in discussions to secure growth capital for Shriram Finance. Nothing has been finalised. Discussions are with multiple investors,” the company told Business Standard in response to a question on whether it is in talks with Mubadala and Warburg.
According to media reports, Bain Capital was also in the race for the company.
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While Warburg did not comment on Business Standard queries, Mubadala did not respond.
The deal is likely to be between Rs 5,300 crore and Rs 6,500 crore, according to the reports. Shriram Finance owns 84.82 per cent in SHFL, while private equity major Valiant Capital Management holds the majority of the remaining stake.
Shriram Housing Finance Ravi Subramanian Managing Director and Chief Executive Officer said: “The past three years, with a CAGR of 56 per cent, we are consistently expanding in newer territories and have the adequate capital buffer to drive business growth.”
Subramanian said the company was optimistic about the growth prospects as the demand for affordable housing would come from the rural and semi-urban markets.
“The home loan growth momentum is expected to remain strong in the medium term as well.”
SHFL on Tuesday reported 67 per cent year-on-year (Y-o-Y) growth in its fourth quarter profit after tax (PAT) at Rs 62.1 crore. The company’s assets under management (AUM) also grew to Rs 13,762 crore in the same quarter.
The disbursals for the quarter jumped 77 per cent Y-o-Y to Rs 2,302 crore, and the overall disbursal reached Rs 7,591 crore in the past financial year. Asset quality also improved with gross stage-3 assets at 1.03 per cent, a 2 basis points increase quarter-on-quarter, and a 10 bps increase Y-o-Y.
Net interest margin (NIM) in the same quarter improved by 108 bps Y-o-Y to 7.6 per cent. For the full financial year, the PAT stood at Rs 217.4 crore, registering Y-o-Y growth of 58 per cent. Total AUM has grown more than threefold in the past three years, with a compound annual growth rate (CAGR) of 56 per cent in the past four years. The company also raised Rs 400 crore capital during the last quarter.
