Mumbai: Citigroup Inc.’s former chief executive Vikram Pandit, Singapore’s sovereign wealth fund GIC, JM Financial Ltd (JMFL) and other investors have invested ₹ 875 crore in JM Financial Credit Solutions Ltd, a lender to real estate companies.
While ₹ 430 crore was invested by GIC and Pandit, parent JM Financial put in ₹ 225 crore. The rest came from investors including University of California Endowment fund and hedge fund Falcon Edge.
The funds will allow the non-banking financial company (NBFC) to reduce its leverage and grow the loan book. “The fund infusion comes at a crucial time when the sentiment around the NBFC space is not so positive. Our debt-to-equity ratio after fund infusion will stand at 2.1 from the existing 3.7," Vishal Kampani, managing director of JM Financial group, said in a phone interview.
The target is to grow the loan book by 20-25% each year over the next three years, Kampani added. The shares were purchased via private placement, and the funds were raised at a pre-money equity valuation of ₹ 6,300 crore, valuing the lender at ₹ 7,175 crore.
JM Financial Credit provides funding to real estate projects, including loans for land acquisition, loans against ready property, construction funding and structured deals in the commercial real estate space.
Pandit, appointed as the non-executive chairman of parent JM Financial in 2013, invested about ₹ 540 crore in the NBFC in December 2014.
The NBFC sector has been reeling under negative sentiment primarily driven by defaults at Infrastructure Leasing and Financial Services Ltd (IL&FS), which failed to repay ₹ 12,000 crore in short-term and long-term borrowing, and defaulted on a ₹ 1,000 crore loan from the Small Industries Development Bank of India (Sidbi) on 13 September. It has defaulted on seven repayments in the past 15 days.
“The fund raise is in line with our philosophy to be conservatively leveraged and maintain strong liquidity cushions within the JMFL Group," said Kampani. “We have continuously endeavored to diversify our funding sources in JM Financial Credit through a public issue of bonds in May 2018. The group has successfully raised ₹ 1,379 crore worth of equity funds till date in the calendar year 2018," he added.
In February, JMFL raised ₹ 650 crore by selling shares to institutional investors to support the group’s long-term capital needs. It also raised ₹ 729 crore in equity this year from external investors in its group companies.