Private equity fund KKR and Co. is in talks to acquire a controlling stake in Aadhar Housing Finance Ltd, two people aware of the matter said. The talks are at an exploratory stage and may result in KKR taking control of the affordable housing financier, the people said on condition of anonymity. Aadhar Housing Finance is a unit of Wadhawan Global Capital (WGC) which also controls Dewan Housing Finance Co. Ltd (DHFL).
While a KKR spokesperson declined to comment, a spokesperson for Wadhawan Global Capital said an initial public offering (IPO) or a strategic stake sale of Aadhar has been on the agenda for some time now to “unlock value”.
Mint had been the first to report in April last year that a majority stake sale in Aadhar Housing Finance was in the works and investment bank Rothschild had been mandated to manage the transaction.
“KKR will bring in long-term capital which is crucial for Aadhar Housing Finance’s growth” said the first person cited above. “KKR may look to acquire the company at a discount to its present price to book value,” the person added.
Established in 2011, Aadhar Housing has operations in 13 states, including Uttar Pradesh, Madhya Pradesh, Chhattisgarh, Orissa, Jharkhand and Bihar. It provides loans up to ₹25 lakh to borrowers with income levels between ₹60,000 and ₹6 lakh per annum. The company reported assets under management of nearly ₹7,966 crore as on 31 March.
According to the latest corporate filings, WGC, DHFL and members of the Wadhawan family together hold nearly 79% stake in Aadhar Housing Finance. In addition, International Finance Corp., an investment arm of the World Bank, is an investor in the company and held a 16.91% stake as on 31 March this year. During FY18, Aadhar Housing Finance reported a profit after tax of ₹99.72 crore against ₹63.98 crore in FY17.
According to a recent report by credit rating agency Icra, while Aadhar Housing Finance has a diverse funding profile, its ability to tie up funding at competitive rates and maintain spreads will be critical for future growth.
Aadhar Housing Finance, the Icra report states, is heavily dependent on bank borrowings, and its ability to diversify the funding mix and maintain costs while scaling up the portfolio will remain a key factor.
KKR’s interest in Aadhar Housing Finance comes at a time when DHFL has lost more than 40% of its market value since 19 September on concerns around the non-banking finance companies (NBFC) sector due to potential asset-liability mismatches, tightening of liquidity in the short-term money market, and whether NBFCs with higher short-term borrowings are in a position to fully meet their repayment obligations.
Bloomberg reported on 12 October that KKR may spend as much as $270 million to acquire assets from stressed NBFCs as it tries to take advantage of the disruption from a series of defaults by Infrastructure Leasing and Financial Services Ltd, which has triggered a sell-off in NBFC stocks and brought down their valuations significantly.
The report said that in addition to select portfolio purchases, KKR is also seeking outright acquisitions of Indian non-bank lenders and their employee teams, citing people with knowledge of the matter.
Source: Mint