JM Financial has decided to consolidate its holdings in the wholesale debt syndication and distressed credit business under one platform.
The company’s board, in a meeting on Saturday, approved the proposal for JM Financial to acquire a 42.99% stake in JM Financial Credit Solutions (JMFCSL) for a consideration of approximately `1,282 crore.
Post the transaction, the stake held by JMFL in JMFCSL will increase from 46.68% to 89.67%, the company said in a statement.
The board also approved acquisition of 71.79% stake in JM Financial Asset Reconstruction Company (JMFARC) by JMFCSL from JMFL for a consideration of approximately `856 crore, which will raise its stake in JMFARC from 9.98% to 81.77%.
The proposed transaction will result in a net cash outflow of approximately `426 crore from JMFL and shall be funded from surplus cash.
“The proposed transaction shall align our corporate and capital structure offering greater flexibility to optimise capital allocation and distribution of profits to our shareholders,” said Vishal Kampani, non-executive vice chairman, JM Financial.
“We foresee significant long term growth opportunities emerging for our businesses and are well positioned to leverage them in the evolving market scenario.”
The proposed transaction is subject to applicable regulatory, shareholders and other approvals and is expected to be completed in three-six months.
The group’s share in the consolidated profits will accordingly increase and JMFL will have enhanced control of JMFCSL including capital allocation and distribution of profits, said the company. Post the consolidation of shareholding, JMFL’s investments will primarily be towards the expansion of both its retail capital market led business and retail home financing business.
Over the last 15 years, JM Financial Group has developed significant expertise and relationships both in the wholesale and distressed credit businesses. “This expertise shall be channelized to pivot from an on balance sheet business model to a diversified originate-to-distribute /syndication model across asset classes,” said the company.