Mumbai: Anil Ambani-controlled Reliance Capital Ltd will list its housing finance unit to unlock value for its shareholders.
“The listing of Reliance Home Finance will also lead to increased management focus and accelerated growth in the home finance business,” Reliance Capital said in a statement on Tuesday, without giving details.
Reliance Capital’s shareholders would get one share of Reliance Home Finance for every share held of the parent company, the statement said.
After the listing, Reliance Capital will hold a 51% stake in Reliance Home Finance and the home financier will be adequately capitalized to grow the lending book to more than Rs20,000 crore in the next 18 months.
Anmol Ambani, director of Reliance Capital, said the housing finance firm aims to tap into Prime Minister Narendra Modi’s plan to provide affordable housing for all by 2022 and plans to grow its book size to Rs50,000 crore in the next few years.
Reliance Home Finance provides products such as home loan, loan against property, construction finance and affordable housing loans. The firm reported assets under management of Rs8,259 crore during the quarter ended 30 June. It had a non-performing asset ratio of 1% at the end of the first quarter. The firm’s loan book is spread across 20,400 customers from the top 50 cities in India, Reliance Capital said in the statement.
“The plan is to demerge the housing finance arm and unlock value because stocks of NBFCs (non-banking financial companies), including housing finance companies have recently performed well. The 1:1 ratio looks beneficial to shareholders,” said Shriram Subramanian, founder and managing director of InGovern Research Services Pvt. Ltd, a proxy advisory and corporate governance firm.
“It is a straight-off demerger and prima facie, there does not appear any corporate governance problem,” he added.
Shares of Can Fin Homes Ltd, a company promoted by state-owned Canara Bank Ltd, have risen 55% since 1 January. Dewan Housing Finance Corp. Ltd has advanced 21.3%.
Firms such as Gruh Finance Ltd, LIC Housing Finance Ltd, and Indiabulls Housing Finance Ltd have all gained 8-16% since the start of 2016. In comparison, the Sensex has gained 8.56% year-to-date.
Housing credit outstanding as on 31 March was at Rs12.5 trillion, up 19% from Rs10.5 trillion a year ago, according to an estimate by Icra Ltd. Of the total, nearly Rs5 trillion came from housing finance companies and NBFCs. Among housing finance firms, affordable housing accounted for about Rs95,700 crore of total housing loans, Icra said—a 28% rise from a year ago.
Reliance Group companies have sued HT Media Ltd, Mint’s publisher, and nine others in the Bombay high court over a 2 October 2014 front-page story that they have disputed. HT Media is contesting the case.