For the company to concentrate more on its core business and obtain growth capital, the board of Shriram Finance Ltd. (SFL) approved the sale of its housing-finance subsidiary, SHFL, to Warburg Pincus on Monday. | Photo: Shutterstock.com
Prominent US global growth investor Warburg Pincus is in talks with other investors to reduce the risk associated with the Rs 4,630 crore purchase of Shriram Housing Finance (SHFL).
In an effort to acquire growth capital and concentrate more on its core business, the board of Shriram Finance Ltd. (SFL) approved the sale of its housing-finance subsidiary, SHFL, to Warburg Pincus on Monday.
According to sources, Qatar Investment Authority (QIA) may be asked to collaborate with Warburg to make a direct investment in the SFL subsidiary or participate in Mango Crest Investment, an affiliate of Warburg that is investing in SHFL. After the purchase closes, Warburg Pincus is anticipated to invest about Rs 1,000 crore in SHFL to support the company’s growth.
According to a source, “Warburg may be looking for partners to de-risk the acquisition,” suggesting that it may be in discussions with other parties. When Business Standard posed queries, neither Warburg nor QIA provided an answer. A source claims that the discussions may involve pooling investments through Mango Crest Investment in SHFL. A representative for the Shriram Group responded, “Only Mango Crest Investment’s management can answer this,” when approached.
“Applications for the transaction have been submitted to RBI, requesting their approval. By the conclusion of the current fiscal year, we anticipate the transaction to close,” he stated. Pending approvals from the National Housing Bank, the Competition Commission of India, and the Reserve Bank of India (RBI), the deal is anticipated to close.
SFL is a prominent non-banking financial company in India, catering to more than 8.4 million clients with loans for commercial vehicles, two-wheelers, and finance for micro, small, and medium-sized businesses.
The majority of SHFL is owned by the private equity group Valiant Mauritius Partners, with SFL holding the majority of the shares. Valiant will also sell Warburg Pincus its ownership interest as part of this deal. As of March 2024, it had 155 branches around India, assets under management (AUM) of Rs 13,762 crore, and a net value of Rs 1,924 crore.
“While the regulatory procedure is ongoing, it might not be legally feasible to directly purchase an interest in SHFL at this time. According to a source, Mango Crest might facilitate the deal. The New York-based Warburg Pincus has made over $116 billion in global investments through its finance solutions, real estate, and private equity strategies in over 1,000 businesses.
SFL, SHFL, and Valiant received financial advice from JM Financial, Barclays, and Avendus. Shriram Group and Valiant were consulted by Trilegal and Anagram on legal matters, and Cyril Amarch and Mangaldas provided advice. After this deal is completed, SHFL will function as an independent company, with its current management group, headed by Managing Director and CEO Ravi Subramanian, continuing to oversee the company.