Warburg Pincus buys Shriram Housing Finance for ₹4,630 Crore

14 May 2024 , 11:16 AM

Warburg Pincus, a US private equity firm, has fully purchased Shriram Housing Finance Ltd (SHFL) from its promoter Shriram Finance and minority stakeholder Valiant Capital Management for ₹4,630 Crore in the largest M&A transaction in the housing finance sector.

The transaction, valued at 2.8 times Shriram Housing’s net worth, will enable Warburg to enter the burgeoning affordable housing market in the world’s fifth-largest economy.

The New York-based private equity group completed the transaction on Monday with Chennai-based non-banking financing company (NBFC) Shriram Finance, which owned 84.82% of the mortgage lender.

The remaining interest in SHFL, one of the country’s fastest-growing home financing companies, was controlled by San Francisco-based private equity firm Valiant Capital Management.

This is Shriram Group’s first-ever sale. Ravi Subramanian, managing director of Shriram Housing Finance, remarked that this is Warburg’s largest acquisition in India and the largest deal in the housing finance business.

The private equity firm will invest ₹1,000 Crore in equity, according to Subramanian.

“Warburg Pincus remains excited about the affordable housing finance segment in India,” said Narendra Ostawal, Warburg Pincus’ head of India private equity.

According to the agreement, SHFL’s whole management team, including Subramanian, will remain on board. The organisation has 155 offices across India and has ₹13,762 Crore in assets under management (AUM) as of the end of March, with a net worth of ₹1,924 Crore. AUM has grown at a 56% CAGR over the last four years.

Even though it has a one-year opportunity to keep the Shriram identity, the company will adopt a new brand name.

SHFL issued ₹400 Crore in compulsory convertible debentures in the last week of March. This was omitted from the net worth when calculating the deal’s valuation statistic.

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