Home-grown private equity fund ChrysCapital is in advanced negotiations to invest about Rs 400 crore to acquire a 26% stake in Fedbank Financial Services, a wholly-owned unit of Federal BankBSE 0.55 %, a development which signals a continuation of last year’s trend of private equity deluge into financial services companies in the country.
The transaction is expected to conclude within a few weeks and the proceeds will be used for the expansion of Fedbank Financial Services, people close to the deal told ET.
If the deal goes through, it will mark ChrysCapital’s second investment in Federal Bank. The fund had first acquired about 4% stake in the Kerala-based lender in 2012 and sold it in 2016, generating about two times return.
The stake sale would be a culmination of a process which started in April 2017, when Federal Bank had mandated ICICI Securities to find a buyer for its non-banking financial company.
“ChrysCapital has been an investor in Federal Bank before, which is crucial in clinching the deal as both are familiar with each other’s working style. An official announcement of the deal could happen before the end of February,” said one of the persons, who spoke on condition of anonymity.
“This deal will help Federal Bank discover value. It will also help the bank bring in talent and expertise to scale up the business, which the bank believes will create value for the future,” the person said.
Fedbank Financial Services started operations as a home and auto loan distribution arm of its parent in 2012 and subsequently started a gold loan business. It has built a Rs 1,400 crore loan book including home loans, car loans, gold loans, loan against property and construction loans.
C0-founded by former Goldman Sachs banker Ashish Dhawan, ChrysCapital is managing about $3 billion across various funds and is among the aggressive investors in the financial services sector, from where it has made some of its best returns. Besides its early bet in Federal Bank, the asset manager had made investments in Axis Bank, Yes Bank, City Union BankBSE -1.32 % and South Indian BankBSE 0.49 %. From Axis Bank, ChrysCapital could generate a sixfold return, while it netted a staggering 12 times return from its exit from Shriram Group in 2009, just before the global financial crisis. The asset manager raised $600 million for its seventh India fund in February 2017.
Banking, financial services and insurance (BFSI) has been among the top sectors that attracted private equity investments last year. BFSI segment received $7.1 billion across 103 deals, accounting for nearly a third of the total private equity inflow into the country in 2017, according to data compiled by EY. India received $26.8 billion across 589 deals, up 65% on a year-on-year basis, EY said.
