Shriram Finance shares jump 5% on deal to exit housing finance biz

Shares of Shriram Finance rallied over 5% in opening trade on Tuesday after the non-banking finance company (NBFC) announced sale of its housing subsidiary, Shriram Housing Finance, to Warburg Pincus, a U.S.-based private equity firm. With this, the largecap stock snapped six sessions losing streak, falling nearly 11% during the same period.

Early today, Shriram Finance shares opened higher at ₹2,352.40, up 2.2% against the previous closing price of ₹2,300.90 on the BSE. In the early trade, the NBFC stock rose as much as 5.1% to ₹2,419, while the market capitalisation increased over ₹89,600 crore.

Shriram Finance shares have witnessed a strong rally in the last one year, hitting its 52-week high of ₹2,658 on May 3, 2024, rebounding more than 100% from its 52-week low of ₹1,306 on May 22, 2023. The stock has seen some consolidation in recent times, with the stock rising 16% in the past six months, while it dropped nearly 3% in a month.

The share price of the non-bank lender witnessed an uptrend today after the company announced that it will exit the housing finance business by selling its entire 85% stake in Shriram Housing Finance (SHFL) to Warburg Pincus for ₹4,630 crore. The global private equity firm will acquire the stake through its affiliate Mango Crest Investment, subject to regulatory approvals.

The Chennai-based Shriram Finance 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 will also completely divest its equity stake to Warburg Pincus.

“This transaction aims to maximise value creation for both SFL and SHFL, as both companies independently fulfill their respective long-term vision. We welcome Warburg Pincus and look forward as SHFL continues to build on its legacy and embrace its next phase of growth,” says Umesh Revankar, Executive Vice-Chairman, Shriram Finance.

SHFL is one of India's leading players in the affordable housing segment, reporting a robust AUM growth rate of 56% CAGR over the last 4-year period. As of March 31, 2024, the company has a pan-India presence with 155 branches and an AUM of ₹13,762 crore and net worth of ₹1,924 crore.

Following the completion of the deal, SHFL will operate as a standalone entity. “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,” says Y.S. Chakravarti, MD & CEO, Shriram Finance.

Ravi Subramanian, MD & CEO, Shriram Housing Finance, says, “With Warburg Pincus’ global expertise and as partners in growth, we’re well-positioned to further build out SHFL and create a larger impact in the Indian housing finance sector.”

JM Financial, Barclays, and Avendus acted as financial advisors to SFL, SHFL and Valiant. Trilegal and Anagram were legal advisors to Shriram Group and Valiant, while Cyril Amarchand Mangaldas advised Warburg Pincus on the transaction.

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