Bain Capital, Advent International, and CVC Capital are among the private equity funds that are competing to buy Shriram Housing Finance Ltd (SHFL), an arm of Chennai-based non-banking finance company Shriram Finance. The shortlisted bidders are currently conducting due diligence, with binding bids due in a fortnight. SHFL expects a valuation of Rs 6,500 crore for the business, while the initial offers have been in the Rs 5,000-5,500 crore range.
Shriram Finance, which mainly deals with commercial vehicle financing, owns 84.82% of SHFL while San Francisco-based private equity firm Valiant Capital Management owns most of the remaining stake. The company expects a valuation of Rs 6,500 crore for the business, inclusive of a control premium. However, the initial offers have been in the range of Rs 5,000-5,500 crore, according to sources.
Last month, potential buyers submitted non-binding bids for SHFL and the shortlisted bidders, including Bain Capital, Advent International, and CVC Capital, are currently engaged in conducting due diligence. Binding bids are due in a fortnight.
SHFL, which focuses on providing affordable housing, recorded a 69% year-on-year increase in profit after tax to Rs 61.4 crore for the December quarter. For the nine-month period, profit after tax was Rs 155 crore, up 54% from the previous year. Assets under management as of December 31 grew to Rs 12,025 crore, while disbursals stood at Rs 5,289 crore for the nine months until December.
The management of SHFL has said that it expects the company’s tangible net worth (TNW) to rise from Rs 1,298 crore at the end of FY23 to Rs 2,000 crore at the end of FY24. It also aims to scale up assets under management to Rs 20,000 crore by the end of FY25.
Shriram Finance, the parent company, has appointed Avendus, Barclays, and JM Financial as advisors on the sale. Depending on the negotiations, Shriram and Valiant may retain a small stake, but the acquirer will be the controlling shareholder and run the company.
CVC Capital declined to comment, while Advent International, Bain Capital, and Warburg Pincus did not respond to queries regarding the potential acquisition.
In related news, Blackstone-owned affordable housing company Aadhar HFC has refilled its draft papers with the Securities and Exchange Board of India (Sebi) to raise around Rs 5,000 crore through an initial public offering (IPO).
Shriram Finance’s subsidiary, SHFL, primarily deals with affordable housing. Last October, it was noted that housing finance accounted for 64% of SHFL’s portfolio, while non-housing accounted for the rest. The company mainly lends to self-employed customers who are not serviced by the banking sector.
The private equity firms involved in the bidding process may consider roping in co-investors, such as pension and sovereign wealth funds. Shriram Finance is also focusing on newer financial products and the digital business. The Shriram Group has recently ventured into the asset reconstruction business and launched a financial super app called Shriram One, offering investment planning, lending, UPI money transfer, mobile recharge, bill payments, insurance, and more.
