PremjiInvest has invested about Rs225 crore for 45% stake in Shubham Finance, making it the single largest shareholder in the affordable housing finance firm
Mumbai: PremjiInvest, the family investment arm of Wipro chairman and billionaire Azim Premji, has acquired a significant minority stake in Shubham Housing Development Finance Co. Ltd, two people aware of the development said.
PremjiInvest invested about $35 million (Rs225 crore) for about a 45% stake in the affordable housing finance company from promoters as well as existing investors, one of the two people said on condition of anonymity. This makes PremjiInvest the single-largest shareholder in Shubham Housing. The transaction values Shubham Housing at Rs500 crore.
Shubham Housing provides housing credit to people employed in the informal sector. According to its website, it is present in 12 states, with a loan portfolio of nearly Rs1,200 crore. “The deal has been signed last week and the announcement is expected soon," said the second person, also on condition of anonymity.
Founded in 2010, Shubham Housing raised Rs122 crore in a round led by Motilal Oswal Private Equity Advisors and existing investors including Helion Advisors, Elevar Equity, Accion Frontier Inclusion Fund and Saama Capital India Advisors in 2014. The company had previously raised $8 million in 2012. With the PremjiInvest deal, Saama Capital and Accion Frontier will exit Shubham Housing while Motilal Oswal, Helion Advisors and Elevar Equity will remain, the second person said.
Investment bank Avendus Capital (Pvt. Ltd) advised Shubham Housing on the transaction.
When contacted, Rajesh Ramaiah, director and chief financial officer at Premji Invest; Suresh Shanmugham, managing partner and co-founder of Saama Capital; and Ganesh Rengaswamy, partner at Quona Capital, which manages Accion Frontier Inclusion Fund declined to comment, while an email sent to Sanjay Chaturvedi, chief executive officer of Shubham Housing, went unanswered.
Shubham Housing had been looking to raise around $100 million from private equity (PE) funds as the company looks to increase its loan portfolio and expand its network nationally and hired Avendus Capital to manage the fund-raising, Mint reported in August last year.
“As a lending company, a key ingredient for accelerated growth is regular infusion of equity capital. We continue to evaluate such opportunities that can help accelerate the growth of Shubham," Chaturvedi said in an interview last year. According to data from the Registrar of Companies (RoC), Shubham more than doubled revenue to Rs51.9 crore in 2014-15 from Rs24.8 crore a year earlier. Profit, however, declined to Rs1.03 crore in 2014-15 from Rs1.2 crore the previous year.
Several non-banking financial companies (NBFCs) are raising money to tap opportunities in affordable housing.
Affordable housing finance is set to be a Rs6 trillion opportunity by 2022, said a 23 June India Ratings and Research report. There is demand for 25 million homes over FY17-FY22 in the medium-income group and lower-income group categories, the report said.
A combination of factors such as government financial and policy thrust, regulatory support, rising urbanization, nuclearization of families and increasing affordability is converting latent demand into a commercially lucrative business opportunity, the report said.
“Massive opportunity and secured lending makes housing finance an attractive sector. Companies that maintain their basics right and balance this exuberance with disciplined lending will go a long way and will be sought after," said Kaushal Shah, head of financial services at Kotak Investment Banking.
In May, Delhi-based affordable home financier Ummeed Housing Finance Pvt. Ltd raised a series B round of funding of $5.6 million from impact investor Lok Capital, and Duane Park, to expand to new locations in north and central India and for investments in technology. Another housing finance company Aavas Financiers Ltd, a unit of Jaipur-based NBFC, AU Small Finance Bank Ltd, also raised $40 million in May from International Finance Corp. (IFC).