IHC makes its biggest splash yet in India's financial sector with ₹8,850 crore Sammaan Capital deal

Mumbai: International Holding Co. (IHC) is set to acquire a controlling 43.5% stake in Sammaan Capital Ltd (formerly Indiabulls Housing Finance) for ₹8,850 crore, marking Abu Dhabi-based investor’s entry into India’s financial services sector.

The investment, through IHC’s Avenir Investment RSC Ltd, will include a preferential allotment of 330 million equity shares amounting to around ₹4,587 crore, and 300 million warrants worth ₹4,262 crore at a price of ₹139 per share. That’s a discount to Wednesday's closing price of ₹168.55 on the NSE—Thursday was a market holiday on account of Dussehra.

IHC will be classified as the promoter and will have the right to appoint the majority of the directors on the board, subject to the regulator's approval.

“85% of the investment comes in as equity and the remaining 15% is warrants in three tranches, which get exercised in 18 months,” Gagan Banga, managing director and chief executive officer of Sammaan Capital, told Mint. He expects the deal to be completed in 6-12 months.

The transaction will also trigger a mandatory open offer for an additional 26% stake in the company on an expanded capital basis to comply with the Securities and Exchange Board of India’s takeover code. Following the open offer, IHC’s stake in the mortgage lender could increase to up to 63.4% on a fully diluted basis, including shares to be issued when the warrants are exercised.

The NBFC is 98% owned by public shareholders, and 2% comprises employee stock options (Esops) held by the employee trust.

“When we transitioned out of Indiabulls (Finance), it was very clear that institutionalisation was the way forward,” Banga said, adding that having a large institution such as IHC as a promoter will give solidity to the company’s name and a lot more comfort to lenders. “So the company gets efficient debt capital at an optimum cost, and that enables us to start delivering double-digit type ROEs (return on equity) very shortly for shareholders.”

Sammaan Capital will also benefit from the governance framework of the global investment firm and its technology ecosystem, Banga said, adding that IHC has significant investments in companies which are at the “cutting edge of technology”.

“As I see lending evolving, it is going to be a lot about how efficiently we can do our credit underwriting and service borrowers using tech. So, this makes us truly future-ready in all aspects, capital and tech, both of which are very necessary ingredients in our business."

Promoter change

The transaction marks IHC’s foray into the financial services sector in India and is the largest ever primary capital infusion by an investor in a non-bank financial company (NBFC) in the country. Established in 1999, IHC has a market capitalisation of $239.9 billion across multiple lines of business, including asset management, healthcare, real estate, financial services and IT, among others.

“India represents a core strategic market for us, and its long-term growth fundamentals are compelling. We have been impressed by Sammaan Capital’s leadership in enabling home ownership and empowering small businesses across the country,” Syed Basar Shueb, CEO of IHC, said in the statement.

“This USD 1 billion investment reaffirms our commitment to supporting Sammaan Capital in its next phase of development, including the adoption of AI to enhance lending and credit solutions, and to contributing meaningfully to India’s financial ecosystem.”

Growth path

The investment and change in promoter ownership will fuel the next leg of growth for Sammaan Capital on the back of long-term parent capital, deeper access to low-cost liabilities and an improved credit rating, the company said in the statement. The NBFC will continue to focus on providing affordable housing finance and mid-market mortgage solutions to customers.

Banga told Mint that in the next 12-18 months, the NBFC will explore the operational leverage available in the existing business and bring back the efficiencies that the company used to operate at. Over the next 18-36 month period, it will look at other opportunities and areas where it might want to offer to mid-to-lower income group customers across the country, he said.

“That's the target segment. What exactly do we wish to do with the target segment in terms of specific loan products? We will design that over the next 12 to 18 months,” he said, adding that the aim is to grow the company’s assets under management to ₹1 trillion by FY27 and achieve net profits of ₹1 trillion by FY30, supported by this fundraise.

“Even in 2030, our capital adequacy will be 27-28%,” Banga said, explaining that this means the company will have no need to raise equity but will continue to borrow from the debt markets, including external commercial borrowings. The expected improvement in its credit rating triggered by the fundraise, combined with strong promoter backing, is also seen helping bring down the overall cost of funds for the NBFC, he said.

“My analysis is that in about 12 months our cost of borrowing should be down by at least 150 basis points,” he said, adding that the focus will remain on building “as diversified a debt profile as possible” for which the NBFC will continue to explore all possible borrowing options.

In August, the mortgage-focused lender approved raising $300 million through senior secured social bonds at a coupon of 8.95% and a three-year tenure. At the time, the company’s investor presentation said it had raised $3.8 billion from 215 foreign institutions, of which it has repaid $3.5 billion in the last 10 years. In FY25, it raised $350 million and repaid $161 million.

The pace of incremental fundraising via foreign currency borrowing by the NBFC was slower than the pace of repayment since FY19, it said. That year, Indiabulls Housing Finance, still reeling from the impact of the IL&FS crisis, faced accusations of sanctioning dubious loans to corporate entities and financial irregularities, leading to weak financials.

The NBFC has since been on a recovery path, with founder Sameer Gehlaut completely exiting in late 2023. The company was renamed Sammaan Capital effective July 2024.

The “beauty of IHC” is that it is not a private equity fund and is not looking at the business from a 3-5 year perspective, and is instead looking at it for “perpetuity”, Banga said. “They have a certain investment model, but when it comes to running businesses, they are rather conservative and careful, which gels well for a financial services company. There is no ultra growth pressure,” he said, adding that the focus is on the quality of the book.