Warburg Pincus buys Shriram Housing Finance in $554 million deal

Shriram Finance Ltd (SFL) will sell its housing finance arm Shriram Housing Finance Ltd (SHFL) to New York-based private equity firm Warburg Pincus in a deal valued at ₹4,630 crore ($554 million), the company said.

The sale was approved by the SFL board late Monday and is subject to regulatory approvals.

Shares of Shriram Finance jumped 5% early Tuesday on the company’s plan to exit its housing finance vertical.

SFL holds a controlling stake in SHFL while Mauritius-based private equity firm Valiant Partners L.P. holds the remaining stake. As part of the deal, Valiant will completely divest its equity stake to Warburg Pincus.

Warburg Pincus will acquire the stake through its affiliate, Mango Crest Investment Ltd. 

This transaction “marks a significant strategic milestone in the journey of Shriram Housing Finance, underscoring the exceptional value it has created,” the company said in a statement. 

Following the conclusion of this transaction, Shriram Housing Finance will operate as a standalone entity. 

The management team at SHFL led by managing director and chief executive officer (MD & CEO) Ravi Subramanian will continue to lead the business.

“This transaction aims to maximize value creation for both SFL and SHFL, as both companies independently fulfil their respective long-term vision. We welcome Warburg Pincus and look forward as SHFL continues to build on its legacy and embrace its next phase of growth,” SFL executive vice-chairman Umesh Revankar said. 

Commenting on the deal, Y.S. Chakravarti, MD & CEO, Shriram Finance Ltd, said, “The acquisition of SHFL by Warburg Pincus stands as a testament to the unwavering commitment and dedication of SHFL’s team in establishing a robust and successful business franchise. We believe that this transaction is in the best interest of SHFL shareholders towards greater value generation and comes at an opportune time for us as well.” 

SFL is one of India’s leading NBFCs, offering commercial vehicle loans, two-wheeler loans, and MSME financing to over 8.4 million customers across the country. It is one of India’s largest retail asset financing NBFC with assets under management (AUM) of ₹2,24,862 crore ($26.92 billion).

Shriram Finance will continue to focus on growth led by the short to medium-tenor consumer finance business while Shriram Housing Finance will now chart out its differentiated path, Chakravarti added. 

Subramanian said SHFL was fully committed to creating value for all stakeholders as it establishes itself as a new-age home finance solutions provider.

SHFL has a pan-India presence with 155 branches and an AUM of ₹13,762 crore ($1.65 billion) and net worth of ₹1,924 crore ($230 million) as of 31 March. The company has been reporting a robust AUM growth rate of 56% CAGR over the last 4-year period.

“Our focus on innovative customer-centric solutions, product diversification, and superior customer experience remains steadfast, supported by cutting-edge technology and analytics. With Warburg Pincus’ global expertise and as partners in growth, we’re well-positioned to further build out SHFL and create a larger impact in the Indian housing finance sector,” Subramanian added. 

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

“Under Ravi’s leadership, Shriram Housing Finance has embarked on a remarkable journey positioning itself as one of India’s leading affordable housing finance companies. Their strong team, consistent improvement in financial metrics, geographically diversified presence, customer-first approach, and robust processes are aspects that stand out. Warburg Pincus has a deep history of partnering with exceptional teams, particularly within financial services and we are excited to support Ravi and the management team as the company advances into its next phase of growth,” Ostawal added. 

Warburg Pincus has more than $84 billion in assets under management with a  portfolio spread across 250 companies, diversified by stage, sector, and geography.