Private equity firm EQT has inked a deal to acquire a 100% stake in affordable housing finance company IndoStar Home Finance for Rs 1,750 crore, or $209.5 million, from its parent company, IndoStar Capital Finance.
IndoStar Capital is controlled by Canadian alternative investment firm Brookfield Asset Management Inc. Brookfield acquired a majority stake in the non-bank lender in the early 2020 from Indian private equity firm Everstone.
IndoStar Capital's decision to sell its housing finance business comes more than a year after it said that it was exploring a merger of the unit with the mortgage lending arm of JM Financial. However, that merger plan appears to have collapsed.
The latest deal, which includes a further investment of Rs 500 crore into the housing finance company, will be executed through BPEA EQT Mid-Market Growth Partnership(EQT) affiliate WITKOPEEND B.V.
The transaction is subject to customary conditions precedent, including approval of the Reserve Bank of India (RBI), consent from lenders, and a nod from the shareholders.
Daiwa Corporate Advisory India and Ambit acted as exclusive financial advisors to IndoStar Capital Finance and IndoStar Home Finance for the transaction.
"Indostar Home Finance has established itself as a leading player in this segment and is well-positioned for continued growth...EQT looks forward to supporting the company in its next phase of growth,” said Hemant Sharma, managing director, EQT Private Capital Asia advisory team.
IndoStar Capital expects the divestment to help achieve accelerated growth and create value in its core verticals of vehicle finance and small business loans.
“We are confident that under EQT's stewardship, IndoStar Home Finance will continue to thrive and deliver value to its stakeholders,” Bobby Parikh, chairman, IndoStar Capital said in a statement.
The assets under management of the home finance company rose 40% year-on-year (y-o-y) to Rs 2,270 crore as on March 31 aided by a growth in disbursements. The company disbursed Rs 937 crore in the year under review, with an average ticket size of Rs 9 lakh. Currently, the company caters to 28,923 customers. As on 30 June 2024, its AUM was at Rs 2,395 crore.
“We are excited to embark on this new journey with EQT, who shares our vision and whose partnership will significantly help advance our mission of delivering affordable housing finance solutions across India,” said Shreejit Menon, chief executive officer, IndoStar Home Finance.
EQT has been active in the financial space in recent times. The firm, along with ChrysCapital, acquired education loan provider HDFC Credila Financial Services last year in a deal worth around Rs 11,063 crore, or $1.3 billion.
It had also invested in RBL Bank through the BPEA Private Equity Fund VII in 2020, but sold the entire 7.9% stake through an open market transaction earlier this year.
Various private equity firms have become increasingly keen on the affordable housing finance segment in India, in light of the robust demand for loans.
In August, PE major Warburg Pincus acquired Mumbai-based Shriram Housing Finance for Rs 4,630 crore. The deal followed TPG’s acquisition of the erstwhile Poonawalla Housing Finance for Rs 3,900 crore around two years ago.
While EQT was in a race to acquire housing finance company Aavas Financiers earlier this year, the deal was ultimately secured by CVC Capital Partners.