Adar Poonawalla-owned NBFC Poonawalla Fincorp on Wednesday announced the sale of its housing subsidiary, Poonawalla Housing Finance to TPG for Rs 3,900 crore. The deal has been struck at around 3.5x of the company’s Rs 1,081.8 crore net worth in March 2022.

The Poonawalla Fincorp’s board approved the sale of Poonawalla Housing Finance to Perseus SG Pte, an entity affiliated with TPG Global, LLC. This comes at a time when value unlocking of the housing finance subsidiary was one of the stated objectives in the company’s Vision 2025 statement. It is also in line with the company’s focus on consumer and MSME financing.

The company received proposals that included those for a full buyout. “Post an exhaustive strategic review of the proposals, the board decided that complete stake sale would be in the best interest of both the entities and all stakeholders considering the different customer segments, geographies, and distribution model,” the NBFC said.

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Adar Poonawalla, chairman, Poonawalla Fincorp, said, the standalone Poonawalla Fincorp would continue to focus on its growth coming from tech-led businesses and a branch-light model while Poonawalla Housing would follow its own differentiated path as a completely independent business.

“The investment firm, TPG’s experience in building and supporting leading financial services companies will add greater value to Poonawalla Housing,” said Poonawalla, adding that the financial services business was of strategic importance to them and they were fully committed to creating value for all stakeholders and building Poonawalla Fincorp into a new-age financial services player of choice.

The housing finance company was part of the acquisition of Magma Fincorp by Poonawalla. The housing subsidiary was focused on the affordable housing finance segment. Poonawalla Housing Finance’s AUM in FY22 was Rs 5,282 crore with an average ticket size of Rs 30 lakh.

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The group had planned for value unlocking for the housing finance business with an IPO planned in 2025. A few months back, the company was planning to raise around Rs 1,000 crore in this financial year by diluting with a 10-15% stake.

PHFL’s Assets Under Management (AUM) stood at Rs 5,612 crore as on September 2022 with average monthly loans at Rs 200 crore. Disbursements in Q2FY23 were Rs 611 crore with a PAT of Rs 33 crore while Q1FY23 disbursements were at Rs 535 crore and a PAT of Rs 30 crore. PHFL had its long-term credit rating upgraded to ‘AAA/Stable’ by CARE recently.

The transaction would maximize the shareholders’ value in the long term, as the Poonawalla Fincorp would focus on building a tech-led and digital-first financial services company in consumer and MSME financing. Abhay Bhutada, managing director, Poonawalla Fincorp, said the transaction would further support their growth strategy, given the huge market opportunity consumer and MSME segment. With the rapidly growing digital ecosystem, Poonawalla Fincorp (standalone) saw growth opportunities in its current and proposed line of businesses.

The Poonawalla Fincorp standalone AUM was Rs 13,000 crore and the consolidated AUM of Rs 18,560 crore as on September 30, 2022. The company aspires to achieve AUM growth of 35-40% y-o-y over the next three years and work towards achieving RoA in the range of 4% to 4.5%. The company said it would continue to drive consolidation of its branches, manpower and create an efficient structure. “The company is already well capitalised and has one of the lowest cost of borrowings amongst its peers. This transaction will further strengthen it for exponential growth over the next 5 to 7 years,” the company said.