In the largest deal in the affordable housing finance space, the board of Shriram Finance on Monday approved the sale of its housing finance subsidiary Shriram Housing Finance (SHFL) to Warburg Pincus for Rs 4,630 crore.
Warburg Pincus will acquire the stake through its affiliate Mango Crest Investment. This is also the US-based private equity firm’s biggest deal in India. The proposed transaction is valued for equity and convertible instruments of the housing finance company.
Shriram Finance will receive Rs 3,909 crore, along with certain additional amounts based on occurrence of identified events.The proposed transaction is subject to receipt of necessary regulatory approvals and fulfilment of other customary conditions. According to the company’s estimates, the transaction is expected to be completed by February 7, 2025.
Shriram Finance holds a controlling stake in the housing finance company, while private equity firm Valiant Partners LP (Valiant), Mauritius, holds the remaining ownership. As part of this transaction, Valiant will also completely divest its equity stake to Warburg Pincus.“Following this transaction, Shriram Housing Finance will operate as a standalone entity, continuing to enhance value for its stakeholders as it preserves its heritage and mission to provide housing finance solutions to the under-served population of the country,” the company said in a statement.
The housing finance company has 155 branches and an asset size of Rs 13,762 crore. The company has a net worth of Rs 1,924 crore as on March 31. Ravi Subramanian is the managing director & CEO of the company.
“We believe that at this cusp of growth, Shriram Housing Finance is set to unlock greater value as it empowers under-served millions to own homes,” Umesh Revankar, executive vice-chairman, Shriram Finance, said in a statement issued by the company.
“This transaction aims to maximise value creation for both Shriram Finance and Shriram Housing Finance, as both companies independently fulfil their respective long-term vision,” he added.
JM Financial, Barclays and Avendus acted as financial advisers to SFL, SHFL and Valiant. Trilegal and Anagram were legal advisers to Shriram Group and Valiant, while Cyril Amarchand Mangaldas advised Warburg Pincus on the transaction.
“Warburg Pincus has a deep history of partnering with exceptional teams, particularly within financial services and we are excited to support Ravi and the management team as the company advances into its next phase of growth,” Narendra Ostawal, head of India private equity, Warburg Pincus, said.
Currently, Warburg Pincus has investments in various financial services companies like Fusion Microfinance, Home First Finance and IndiaFirst Life Insurance
In 2023, TPG bought a 99.02% stake in Poonawalla Housing Finance from Poonawalla Fincorp for a pre-money equity valuation of around Rs 3,900 crore.