Poonawalla Fincorp To Sell Housing Finance Unit To TPG

Adar Poonawalla-led Rising Sun Holdings had acquired controlling stake in Magma Fincorp for Rs 3,456 crore in February 2021.

<div class="paragraphs"><p>(Source: <a href=";utm_medium=referral&amp;utm_content=creditCopyText"></a>/ <a href=";utm_medium=referral&amp;utm_content=creditCopyText">Unsplash</a>)</p></div>
(Source: Unsplash)

Non-bank finance lender Poonawalla Fincorp Ltd. said that its board has agreed to sell its housing finance subsidiary to an affiliate of TPG Global LLC for Rs 3,900 crore.

The subsidiary, Poonawalla Housing Finance Ltd., will be sold to Perseus SG Pte Ltd. The transaction is subject to regulatory approvals, Poonawalla Fincorp said in an exchange notification on Wednesday.

"The transaction will maximise the shareholders’ value in the long term as Poonawalla Fincorp focusses on building a tech-led and digital-first financial services company, with leadership in consumer and MSME (micro, small and medium enterprise) financing," the company said.

The value unlocking of the housing finance subsidiary was one of the stated objectives in the company’s vision 2025 statement. With the evolving digital ecosystem, Poonawalla Fincorp sees growth opportunities in its current and proposed lines of businesses, it said.

The company is aiming to achieve an asset under management growth of 35-40% year-on-year over the next three years.

TPG will also infuse additional equity capital up to Rs 1,000 crore to support growth.

“As India’s leading affordable housing finance provider, PHFL is uniquely positioned to grow in the fast-expanding affordable housing sector, which we believe is one of the most resilient asset classes across interest rate cycles,” Puneet Bhatia, co-managing partner of TPG Capital Asia said in a statement.

Driven by tailwinds provided by the government’s various initiatives such as the Pradhan Mantri Awas Yojana, National Housing Bank’s affordable refinancing program, reduction in risk weights for housing loans, and increased regulatory compliance, a growing Poonawalla Housing Finance is expected to serve an even larger population to fulfil their aspiration of owning a house, he said.

Among the other stated objectives are:

  • Achieving consistent return on assets within 4-4.5%.

  • Maintaining net non-performing asset ratio below 1%.

  • Consolidating branches, manpower and creating an efficient structure.

  • Exploring deep investments in technology and analytics through both organic and inorganic routes.

"We remain committed towards achieving our stated Vision 2025, with our focus on product diversification, innovation and superior customer experience complemented by best-in-class technology and analytics," said Abhay Bhutada, managing director, Poonawalla Fincorp.

In February 2021, the Adar Poonawalla-led Rising Sun Holdings Pvt. acquired controlling stake in Magma Fincorp Ltd. for Rs 3,456 crore. In July last year, it renamed the company to Poonawalla Fincorp. It also renamed Magma Housing Finance to Poonawalla Housing Finance.

As of Sept. 30, Poonawalla Fincorp had a consolidated AUM of Rs 18,560 crore, up 21.5% year-on-year. Its gross NPA ratio stood at 1.52%, down 67 basis points quarter-on-quarter. Net NPA ratio, too, dipped 13 basis points sequentially to 0.83%. The company's standalone capital adequacy ratio stood at 45%.

Poonawalla Housing Finance had a loan book of Rs 5,612 crore at the end of the second quarter. The gross bad loan ratio stood at 0.84%, while net NPA ratio was 0.53%. It had a capital adequacy ratio of 39%.