The combine of private equity firm India Value Fund ( IVF) and buyout fund Baring PE Asia has emerged the frontrunner for ICICI Home Finance, two bankers with direct knowledge of the talks told FE. They expect the transaction, valued at $372 million or R2,500 crore, to close soon.
Investment bankers familiar with the transaction said IVF is expected to put in around $100 million while the remaining $272 million will be footed by Baring.
Email request for comments from Baring Asia and IVF remained unanswered till the time of going to press. Both Baring Asia and IVF are understood to have put in separate bids earlier but could not make it to the final shortlist. In fact, ICICI Bank is believed to have nearly signed a term sheet with TPG Capital but called off the deal at the last minute following a revised joint bid by IVF and Baring PE Asia. The Baring-IVF alliance is offering to pay a little more, sources said, than TPG had said it would.
ICICI Bank holds a 100% stake in ICICI Home Finance, which posted a profit of R180 crore in FY16, down 9% over the previous year. The lender had put the home finance business on the block a year ago and according to media reports was expecting a valuation of around R4,400 crore.
According to rating agency Icra, the Indian mortgage market is expected to grow by 17-19% in coming years with a negligible risk of defaults. Softening interest rates are expected to have a positive impact on asset quality and housing finance companies have generated significant interest among private equity funds.
In February last year, US private equity fund Carlyle Group purchased a 49% stake in PNB Housing Finance from Destimoney Enterprises for R1,600 crore. Again in February this year domestic PE fund Kedaara Capital and Partners Group purchased the mortgage arm of Jaipur-based lender Au Financiers for R950 crore.