IndoStar Capital Finance, a non-banking finance company (NBFC) controlled by private equity firm Everstone Capital, is all set to acquire a majority stake in ICICI Home Finance at an equity valuation of Rs 3,000 crore for the ICICI Bank subsidiary.
“At Rs 3,000 crore, ICICI Home Finance is valued at two times its book value for the last financial,” said an investment banker familiar with the sale process for the ICICI Bank subsidiary. At the end of March 2017, the home finance company had a book value of Rs 1,584 crore. He added that it was a fairly valued deal as its loan book also has exposure to developers, which typically gets valued lower than the retail book.
ICICI Home Finance closed its loan book at Rs 8,972 crore for 2016-17. It reported a net profit of Rs 183.2 crore on the back of Rs 1,052.8-crore revenue for the year.
ICICI Bank had put its home finance subsidiary on the block in July 2015 after deciding it was a non-core asset. The second-largest private bank in the country continues with its mortgage business within its banking operations.
Its talk to sell ICICI Home fell through twice - first with TPG Capital and then with a combine of India Value Fund Advisors and Baring Asia.
“While IndoStar is a strategic buyer, which will own and run the operations, Everstone is backing it as a financial investor,” said another person, who has worked on the deal. The deal has been finalised and the official announcement is expected following approval from ICICI Bank's board. “The transaction with regulatory approvals is expected to be completed in the next three months,” he says.
Everstone and IndoStar declined to comment to Business Standard’s queries. An ICICI Bank spokesperson said, " ICICI Bank has been receiving proposals from interested parties regarding its stake in ICICI Home Finance Company. However, no proposal has been taken to the Board of Directors of the Bank for consideration.”
IndoStar started its operations in 2011 and at the end of March, it had a loan book of Rs 5,247 crore and a net non-performing asset of 1.2 per cent. In the last few years, IndoStar has emerged a key player in corporate lending and is strongly capitalised with a net worth of Rs 1,901 crore as of March 2017. Its net profit has grown at a compound annual growth rate of 31 per cent to Rs 210 crore since 2011.
It has been operating across corporate lending, small and medium enterprise lending and it recently started its housing finance subsidiary.
In April, financial services veteran R Sridhar joined the NBFC as executive vice-chairman and chief executive officer (CEO) to grow its retail lending business.
IndoStar has a wholly-owned housing finance subsidiary, IndoStar Home Finance.
Sridhar was earlier managing director and CEO of Shriram Transport Finance and has over three decades of experience in financial services. He took over from Vimal Bhandari, who had led the firm since 2011. Sridhar has also infused around Rs 100 crore into the company and has played a significant role in the acquisition of ICICI Home Finance.
Sridhar has also been a senior advisor to TPG since February 2014 and had played a role when it was in talks with ICICI Home Finance for its buy-out, but the deal fell through. Now, he managed to acquire a controlling stake in ICICI Home Finance within a few months of joining IndoStar.
IndoStar plans to grow the ICICI Home Finance business to about Rs 15,000 crore loan book in its first year of operations, said a person familiar with the NBFC’s growth plans.
July 2015: ICICI Home Finance put on the block
June 2016: Talks with TPG Capital in progress
August 2016: India Value Fund Advisors and Baring Asia enter the fray with a higher bid
December 2016: Deal with India Value Fund Advisors falls through
April 2017: R Sridhar joins IndoStar Capital Finance as vice-chairman & CEO
July 2017: IndoStar Capital Finance set to buy