Shriram Finance will focus more on its core business: Umesh Revankar

Warburg to invest Rs 1,000 crore in SHFL

Shriram Finance (SFL) has decided to sell its housing finance business to focus more on its core operations and secure growth capital, announced Executive Vice-Chairman Umesh Revankar. He added that Warburg Pincus may infuse around Rs 1,000 crore into Shriram Housing Finance (SHFL) following the completion of the deal to fund the expansion of its business.

On Monday, the board of SFL approved the sale of its housing finance subsidiary SHFL to Warburg Pincus, a leading global growth investor, for Rs 4,630 crore. The deal is expected to be completed by the end of the current financial year (2024-25), pending clearances from the Reserve Bank of India (RBI), the Competition Commission of India, and the National Housing Bank.

“Over the past four years, SHFL has experienced a compound annual growth rate (CAGR) of more than 50 per cent. It will continue to grow. This is our sole subsidiary,” Revankar commented on SHFL’s growth.

“Both SFL and SHFL require capital. We decided to exit the housing finance sector to facilitate SFL’s business growth,” he added.

Warburg Pincus will acquire the stake through its affiliate Mango Crest Investment from all the sellers.

“Every business, management has a bandwidth. We excel in vehicle finance and lead in this sector. We aim to develop a small and medium-sized enterprise (SME) business. SME financing is fragmented in the non-banking financial sector. Given our leadership in two-wheeler and used vehicle financing, we realised we couldn’t dedicate enough attention to housing finance,” Revankar elaborated.

According to him, one advantage for SFL will be an improvement in capital adequacy.

“Proceeds will be reinvested into our business,” he added.

SFL is one of India’s leading non-banking financial companies, serving over 8.4 million customers in India, offering commercial vehicle loans, two-wheeler loans, and micro, small, and medium enterprises financing.

SFL holds a controlling stake in SHFL, while private equity firm Valiant Mauritius Partners holds the rest. As part of this transaction, Valiant will also sell its equity stake to Warburg Pincus.

“Warburg plans to inject around Rs 1,000 crore into SHFL. This will mainly fund business expansion plans,” he added.

SHFL, one of India’s leading players in the affordable housing segment, has reported an annualised growth rate of 56 per cent CAGR over the past four years.

Following the conclusion of this transaction, SHFL will operate as a standalone entity. The existing management team of SHFL, led by Ravi Subramanian, managing director and chief executive officer, will continue to lead the business.

“We believe that a partner at this stage will assist the housing finance company in focusing and expanding its business. Hence, we deemed it necessary for it to operate independently and separately,” he added.