Poonawalla Fincorp announces sale of its housing subsidiary to TPG for Rs 3,900 cr

The transaction for the stake sale in Poonawalla Housing Finance Limited to TPG (Perseus SG Pte. Ltd), an entity affiliated with TPG Global, LLC, has been approved at a valuation of Rs 3,900 crores in the board meeting, Poonwalla Fincorp said in a press release.

The approval is subject to regulatory approvals.

The transaction will maximize the shareholders’ value in the long term as Poonawalla Fincorp focusses on Poonawalla Fincorp will continue to work towards achieving its stated Vision 2025 at a standalone level with focus on Growth, Asset Quality and Profitability.

Underlining the rationale behind the transaction, Poonawalla Fincorp said it would help focus on maximizing value creation by optimizing resource allocation and increasing management focus on their respective business needs.

The value unlocking of the housing finance subsidiary was one of the stated objectives in the company’s Vision 2025 statement, it added.

“In line with that, company started the process by looking at part dilution and price discovery. The company received tremendous response with proposals including those for a full stake buyout,” the company said.

Post an exhaustive strategic review of the proposals, the board decided that a complete stake sale would be in the best interest of both the entities and all stakeholders considering the different customer segments, geographies, and distribution models.

“With the rapidly growing digital eco-system, Poonawalla Fincorp (standalone) sees tremendous growth opportunities in its current and proposed line of businesses. The digitization further complements innovation in products, customer experience and engagement. It will continue to build a strong retail franchise in consumer and MSME financing,” the company said in a press release.

On a Standalone Basis, Poonawalla Fincorp Limited enumerated the targets it seeks to achieve.

It will focus on tech-led growth in the chosen segments by leveraging technology and digital capabilities. The company aspires to achieve AUM growth of 35-40 percent y-o-y over the next 3 years.

The company will work towards achieving consistent RoA in the range of 4% to 4.5 percent by focussing on risk calibrated growth and operational efficiencies.

“With prudent underwriting and collection capabilities, we expect to maintain Net NPA below 1 percent,” it said.

It would work to reduce opex by driving consolidation of its branches, manpower and create an efficient structure in line with its growth strategy.

The company is already well-capitalized and has one of the lowest costs of borrowings among its peers. The stake sale in housing subsidiary will further strengthen it for exponential growth over the next 5 to 7 years.

Considering the company’s large capital base, it is well poised to explore deep investments in technology and analytics through both organic and inorganic routes.

Poonawalla Fincorp Chairman Adar Poonawalla said: “Financial services business is of strategic importance to us, and we stay fully committed towards creating value for all our stakeholders and building Poonawalla Fincorp into a new age financial services player of choice.

“Poonawalla Fincorp will continue to focus on its growth coming from Tech-Led businesses and a branch-lite model while Poonawalla Housing will follow its own differentiated path as a completely independent business,” he said.

As a global leading investment firm, TPGs experience in building and supporting leading financial services companies will add greater value to Poonawalla Housing, he added.

Abhay Bhutada, Managing Director, Poonawalla Fincorp, said: “Our chosen segments of consumer and MSME will continue to have healthy growth and we are confident that we will further accelerate  our growth story by bringing innovative customer-centric solutions.”