Warburg in talks to rope in QIA as investor in Shriram Housing Finance

Leading US-based global growth investor Warburg Pincus is in discussions with multiple investors to de-risk the Rs 4,630 crore acquisition of Shriram Housing Finance (SHFL).

The board of Shriram Finance Ltd (SFL) on Monday approved the sale of its housing-finance subsidiary SHFL to Warburg Pincus to focus more on its core operations and secure growth capital.

Sources indicate that Qatar Investment Authority (QIA) may be engaged to either invest in Mango Crest Investment (an affiliate of Warburg which is investing in SHFL) or join hands with Warburg to invest directly in the SFL subsidiary. Warburg Pincus is expected to infuse around Rs 1,000 crore into SHFL, following the completion of the deal to fund the expansion of its business.

“Warburg may be looking for partners to de-risk the acquisition,” said a source indicating that it may be in talks with multiple players. Neither Warburg nor QIA responded to questions from Business Standard. According to a source, the talks may be for jointly investing in SHFL through Mango Crest Investment. When contacted, a Shriram Group spokesperson said, “This can be answered only by Mango Crest Investment’s management.” 

“Applications have been filed with RBI seeking their approval for the transaction. We expect the transaction to close by the end of the current fiscal,” he said. The deal is expected to be completed, pending clearances from the Reserve Bank of India (RBI), the Competition Commission of India, and the National Housing Bank.

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. It has a pan-India presence with 155 branches and assets under management (AUM) of Rs 13,762 crore and a net worth of Rs 1,924 crore as of March 2024.

“It may not be legally possible to directly pick a stake in SHFL now, as the regulatory process is going on. The deal may happen through Mango Crest,” said a source. New York-based Warburg Pincus has invested more than $116 billion in over 1,000 companies globally across its private equity, real estate, and capital solutions strategies. 

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  Following the conclusion of this transaction, SHFL will operate as a standalone entity, and the existing management team of SHFL led by Ravi Subramanian, Managing Director and Chief Executive Officer, will continue to lead the business.

First Published: Jun 16 2024 | 2:35 PM IST