Shriram Finance stated on Monday that it has sold its housing finance subsidiary to private equity company Warburg Pincus for Rs 4,630 crore, allowing it to focus on vehicle financing and small business loans.
Warburg has committed to investing an additional Rs 1,000 crore in Shriram Housing Finance (SHF), which was founded in 2011. The agreement is likely to close by the end of the fiscal year in March 2025, according to Shriram's executive vice chairman Umesh Revankar.
SHF has expanded at a compounded annual rate of more than 50%, and the Shriram group prefers to focus on its mainstay of small business and car loans rather than injecting money into the company, Revankar explained.\
He stated that Shriram Finance has achieved an internal rate of return of 22% on the money put in SHF.
Shriram Finance holds 83.8% of SHF, while Valiant, a PE player, owns 14.8% and is also divesting its whole investment, and the remaining 1.4% belongs to workers.
Under the terms of the agreement, Warburg Pincus' subsidiary Mango Crest Investment Ltd would purchase SHF from all of the sellers. "The proposed transaction is valued at Rs 4,630 crore for equity and convertible instruments of SHFL," Shriram Finance stated in a regulatory filing.
The agreement requires approval from the National Housing Bank, the Competition Commission of India, and the Reserve Bank, he stated.
