Shriram Finance looking to sell 15% stake in housing finance arm: Report

Indian shadow lender Shriram Finance is looking to pare as much as 15% stake in its housing finance arm at a valuation of 10 billion rupees ($121.35 million), two senior sources with direct knowledge of the matter told Reuters.

Shriram Housing Finance Ltd., which offers home loans, largely in the affordable housing segment, has received interest from several private equity players, including BPEA EQT, formerly Baring PE Asia.

"The equity infusion will likely be to the tune of 10 billion rupees ($121.46 million)," the first source said, requesting anonymity. The company could take a final call on the deal by March-end after evaluating all the offers, the person added.

Shriram Housing Finance is a unit of Shriram Finance, one of India's largest non-banking finance companies formed by the merger of Shriram Capital, Shriram City Union Finance and Shriram Transport Finance in November.

Post the equity infusion, Shriram Finance's stake in the housing arm will drop to around 70% from 85%, both the sources said.

The sources did not wish to be quoted as the talks were still private.

As of December-end, Shriram Finance held an 85% stake in Shriram Housing Finance, and San Francisco-headquartered Valiant Capital Management, L.P. had the remaining.

"Private equity investors are showing strong interest," the second source said. The company is already in advanced talks with two-three investors, the source added.

A spokesperson for Shriram Housing Finance declined to comment, saying the company does not comment on speculation.

If the deal goes through, Shriram Housing Finance could push back its plans for a public listing by at least four to five years, the first source said.

The housing financier also plans to raise 40 billion rupees via debt in the next financial year that begins in April, assuming the stake sale closes, the second source said.

At the end of the December quarter, Shriram Housing Finance had 71.78 billion rupees of total assets under management, with more than 10 billion rupees in loan disbursals.

($1 = 82.4050 Indian rupees)