Sundaram Finance Ltd, the non-banking finance arm of the TVS Group, said a wholly-owned subsidiary of BNP Paribas has picked up 49.9% stake in Sundaram Home Finance Ltd for Rs197 crore, to tap into India’s booming home-mortgage market.
Sundaram Finance, which will sell around 43% of its stake in Sundaram Home Finance, will receive Rs147 crore, boosting its profit to between Rs80 crore and Rs90 crore in the current year, said T.T. Srinivasaraghavan, managing director of Sundaram Finance.
Sundaram Home Finance will issue fresh equity shares, amounting to 6.7% stake, to Union de Credit pour le Batiment (UCB), the private mortgage arm of BNP Paribas. The new joint venture will be named Sundaram BNP Paribas Home Finance Ltd.
“The key reason for selecting UCB is that they are a specialized mortgage finance company,” said Srinivasaraghavan, who is also on the board of directors of Sundaram Home Finance.
“The joint venture will help us in risk management and product structuring.”
In the new entity, both Sundaram Finance and UCB will have equal board representation with the chairman from Sundaram Finance holding the casting vote, said Srinivasaraghavan.
Sundaram Home Finance has disbursed around Rs470 crore worth of home loans during the year ended March 2007, growing at a rate of 12%. It has a loan portfolio of Rs1,250 crore.
The financial results are yet to be announced.
However, for the year ended March 2006, Sundaram Home Finance reported a net profit of Rs5.86 crore on a turnover of Rs93.38 crore.
Sundaram Finance, in February 2007, acquired 25% stake in Sundaram Home Finance from FMO of Netherlands and International Finance Corp. (IFC) for Rs48.52 crore. The current stake sale to UCB is approximately double the purchase price paid to FMO and IFC.
BNP Paribas also has 49.9% stake in the asset management company, Sundaram BNP Paribas Mutual. The total assets under management as on 31 March 2007 stood at Rs7,430 crore, according to company information.