Shriram Finance to sell housing fin arm to Warburg Pincus for Rs 4,630 crore

Financial services firm Shriram Finance on Monday announced the sale of its housing finance arm to private equity major Warburg Pincus for Rs 4,630 crore to focus on the vehicle finance and small business lending.

Warburg is committed to investing another Rs 1,000 crore in the 2011-incorporated Shriram Housing Finance (SHF) after the closure of the deal, which is expected by the end of fiscal in March 2025, Shriram's executive vice chairman Umesh Revankar told PTI.

SHF has grown at a compounded annual rate of over 50 per cent and the Shriram group wishes to focus on its mainstay of small business and vehicle lending rather than pumping capital into the company, Revankar added.

He said Shriram Finance has made an internal rate of return of 22 per cent on the capital deployed in SHF.

Shriram Finance owns 83.8 per cent of SHF while 14.8 per cent is with PE player Valiant, which is also divesting its stake in full, and the remaining 1.4 per cent is with employees.

Under the deal, SHF would be acquired by Warburg Pincus through its affiliate Mango Crest Investment Ltd from all the sellers.

"The proposed transaction is valued at Rs 4,630 crore for equity and convertible instruments of SHFL," Shriram Finance said in a regulatory filing.

The deal needs go-ahead from National Housing Bank, Competition Commission of India and Reserve Bank, he said.

Shriram Finance is one of India's leading NBFCs, serving over 84 lakh customers across India offering commercial vehicle loans, two-wheeler loans, and MSME financing.

SHF has a total employee base of 3,000 people.

Following the conclusion of this transaction, it said,SHF 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.

Shriram Finance MD & CEO Y S Chakravarti said, "We believe that this transaction is in the best interest of SHFL shareholders towards greater value generation and comes at an opportune time for us as well.".

Shriram Finance Limited will continue to focus on growth led by the short to medium-tenor consumer finance business while Shriram Housing Finance will now chart out its differentiated path, he said.

Narendra Ostawal, Head of India Private Equity, Warburg Pincus said, "We remain excited about the affordable housing finance segment in India...Their strong team, consistent improvement in financial metrics, geographically diversified presence, customer-first approach, and robust processes are aspects that stand out."

The Shriram Finance scrip closed 1.91 per cent down at Rs 2,300.90 a piece on the BSE as against a 0.15 per cent gain on the benchmark.