On Tuesday, Shriram Finance Ltd’s shares rose by more than 5%. They agreed to sell their entire stake in Shriram Housing Finance (SHFL) to Warburg Pincus. Warburg Pincus will buy the stake for Rs 4,630 crore through its affiliate Mango Crest Investment.
Shriram Finance, which owns 83.78% of SHFL, will receive Rs 3,909 crore from the sale, plus additional payments based on certain events. The deal is pending regulatory approvals and other conditions and is expected to be completed by February 7, 2025.
Shriram Finance Sells Housing Arm to Warburg Pincus for Rs 4,630 Crore
The board of Shriram Finance approved selling its housing finance subsidiary, Shriram Housing Finance Limited (SHFL), to Warburg Pincus. Warburg Pincus will own SHFL fully through its affiliate Mango Crest Investment Ltd. The deal is worth Rs 4,630 crore for SHFL’s equity and convertible instruments. However, it still needs regulatory approvals. After the announcement, Umesh Revankar mentioned in an interview that Warburg Pincus plans to invest Rs 1,000 crore in SHFL post the Rs 4,630 crore buyout to boost its business.
The transaction is expected to be completed by February 7, 2025. Shriram Housing Finance earned Rs 1,429.56 crore revenue for the financial year ending March 31, 2024, contributing to 3.93% of Shriram Finance’s core income. Its net worth stands at Rs 1,923.73 crore, which is 0.76% of Shriram Finance’s net worth. Following the announcement, Shriram Finance’s shares surged by over 5.17% to Rs 2,419 on Tuesday, reaching a total market capitalization of over Rs 90,000 crore.
Shriram Housing Finance to Remain Independent
After the sale, Shriram Housing Finance will operate independently, sticking to its mission of offering housing finance to underserved communities. The current management, led by Ravi Subramanian, will stay in charge.
Umesh Revankar assured that there won’t be any job cuts post-sale. Shareholders aim for growth, especially as the company’s Assets Under Management (AUM) grew at a rate of 56% annually over the last four years.
Shriram Finance Sells Stake in Housing Arm to Warburg Pincus
The deal between Shriram Finance and Warburg Pincus has been sealed at a price of Rs 96 per share, lower than the earlier expectation of Rs 140 per share. However, market experts see this as a reasonable valuation.
Shriram Finance plans to sell its entire stake in the housing finance business to Warburg at 2.4 times the book value of FY2024. This move is expected to increase its net worth by 4%. While the Return on Equity (RoE) was lower than its peers, the Asset Under Management (AUM) growth was higher at 71%, raising some concerns but overall market experts remain optimistic about the core business.
Shriram Finance Considers Selling Controlling Stake
Moneycontrol reported on December 15 that Shriram Finance is exploring ways to unlock value in its subsidiary, Shriram Housing Finance Ltd. They have initiated a process to sell a controlling stake in the subsidiary.
Shriram Finance, primarily focused on commercial vehicle financing, owns 84.82% of Shriram Housing Finance, while 14.94% is held by Valiant Capital Management, a private equity firm based in San Francisco. Earlier in March, there were talks that BPEA EQT, another private equity firm, was in advanced negotiations to acquire a minority stake in the housing finance venture, but the discussions did not progress further.
