New York-based private equity firm Warburg Pincus  will acquire Shriram Housing Finance Ltd (SHFL) in a deal valued at ₹4,630 crore for equity and convertible instruments.

Warburg Pincus will acquire the stake through its affiliate Mango Crest Investment Ltd . At present Shriram Finance Ltd  holds a controlling stake in SHFL while private equity firm Valiant Partners L.P. (Valiant), Mauritius, holds the remaining ownership.

As a part of this transaction, Valiant and Shriram Finance will completely divest its equity stake to Warburg Pincus. The existing management team of SHFL led by Ravi Subramanian, Managing Director and Chief Executive Officer, will continue to lead the business. The company has a pan-India presence with 155 branches with an AUM of ₹13,762 crore, net worth of ₹1,924 crore and revenues of ₹1,430 crore, as of March 31, 2024.

Also read: Piramal Group invests ₹600 crore in Annapurna Finance

Umesh Revankar, Executive Vice-Chairman, Shriram Finance Ltd, said,  “With the rapid growth in the consumer finance sector, both SFL and SHFL foresee tremendous opportunities in their respective operating segments. We believe that at this cusp of growth, Shriram Housing Finance is set to unlock greater value as it empowers underserved millions to own homes. This transaction aims to maximise value creation for both SFL and SHFL, as both companies independently fulfill their respective long-term vision.”

SFL will continue its business in commercial vehicle loans, two-wheeler loans, and MSME financing. YS Chakravarti, MD & CEO, Shriram Finance Ltd, added: “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.” 

Traction in housing fin space

The move comes at a time when the affordable housing finance segment is poised for significant growth. Housing finance companies’ AUM is seen growing 12-14 per cent in FY24 and FY25 led by continued growth momentum in housing loans coupled with an expected revival in developer loans, according to CareEdge Ratings. However, regulatory changes, tighter liquidity, continuation of elevated interest rates, delayed resolutions/ recoveries with respect to wholesale loans and competition from banks may pose downside risks.

Ravi Subramanian said, “The affordable housing finance segment is poised for significant growth. At Shriram Housing Finance, we are fully committed to creating value for all stakeholders as we establish ourselves as a new-age home finance solutions provider. Our focus on innovative customer-centric solutions, product diversification, and superior customer experience remains steadfast, supported by cutting-edge technology and analytics.”

Also read: Indian banks’ underwriting standards at risk amid rapid consumer loan growth, says Fitch

Warburg Pincus has been investing into India over the last 25 years.  Narendra Ostawal, Head of India Private Equity, Warburg Pincus, said, “Warburg Pincus remains excited about the affordable housing finance segment in India. 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.” 

India’s housing finance space is seeing some restructuring over the recent six months. While Blackstone-backed Aadhar Housing Finance recently raised ₹3,000 crore through an initial public offering,  Piramal Enterprises Ltd has decided to merge with its unlisted subsidiary, Piramal Capital and Housing Finance Ltd.