Homegrown private equity firm True North is picking up a 17.4% stake in the financial services unit of Federal Bank for Rs 168.6 crore ($23.5 million) as part of a larger deal.
True North is buying the stake in Fedbank Financial Services Ltd (Fedfina) via fresh shares, the private-sector bank said in a stock-exchange disclosure on Thursday. Fedfina’s board approved the share allotment on Tuesday.
The transaction is the first phase of a larger deal, a True North spokesperson said. The PE firm had agreed to acquire a 26% stake in Fedfina in May. In October, the Reserve Bank of India had allowed Federal Bank to sell up to 45% of Fedfina to True North.
The investment will help Fedfina boost its capital base, primarily to support its growing asset business and expand its branch network, Federal Bank said in May. The infusion will also strengthen its capital adequacy and diversify its funding sources.
Fedfina, which received a non-banking financial company licence in 2010, offers property loans, structured finance, gold loans and other products. It also distributes loans of Federal Bank.
According to a report by ratings firm CRISIL, Fedfina has 123 branches, mainly in Karnataka, Andhra Pradesh, Telangana and Tamil Nadu.
As on 31 March 2018, the total loan portfolio of Fedfina was Rs 1,413 crore, up from Rs 962 crore the year before. The profit after tax was Rs 30.8 crore for the year through March 2018, up from Rs 22.53 crore the previous year.
True North
The PE firm is acquiring shares in Fedfina through its sixth fund. In December 2017, VCCircle reported that True North had marked the first close of raising money for its sixth fund at $425-450 million.
True North, set up in 1999 with a focus on mid-sized profitable businesses, had previously raised $2 billion across five funds to invest in various sectors, especially in the categories of financial services, consumer, healthcare and technology products and services.
True North has struck some deals in the financial services space.
In February 2017, True North acquired a majority stake in Home First Finance Company India for about $100 million (Rs 667 crore) .
Also, True North is a promoter of Infinity Fincorp Solutions, which focuses on commodity financing.
The other True North investee companies in financial services segment include Magma Fincorp and Fincare Business Services.
In May 2018, VCCircle reported that a True North-led consortium’s deal to buy Religare Health Insurance Company had collapsed.
