Blackstone Group LP, which on Saturday signed a definitive pact to buy a controlling stake in Aadhar Housing Finance Ltd, will infuse ₹800 crore as additional equity which will which will double the company’s net worth and reduce its debt-to-equity ratio by nearly half, a senior executive at the private equity (PE) firm said.
While the financial details of the deal were not disclosed, two people directly aware of the negotiations said Blackstone has agreed to pay a total of more than ₹3,000 crore for Aadhar Housing, which is one of India’s largest affordable housing finance companies.
The New York-based PE giant beat rival bidders, including Baring Private Equity Asia and Hero FinCorp, the people said, seeking anonymity. They said KKR & Co., which initially showed interest, did not make a binding offer.
“Blackstone was also willing to move faster than the others and managed to close the deal in a quick span of a few days once the final round of negotiations began," said the first person cited above, requesting anonymity.
“The sellers comprised Wadhawan Global Capital, Dewan Housing Finance Co. Ltd (DHFL) and International Finance Corp. (IFC) following which Aadhar has become a 100% Blackstone owned company" the second person cited above said.
Wadhawan Global, DHFL and members of the Wadhawan family held nearly 79% stake in Aadhar as on 31 March 2018, according to the latest corporate filings. IFC, the investment arm of the World Bank, owned 16.91% stake as an investor in the company.
“We will infuse fresh equity to the tune of ₹800 crore on day one in the company, which will double the company’s net worth and reduce its debt-to-equity ratio by roughly half and provide more comfort to the markets and lenders alike," Amit Dixit, senior managing director and head of private equity in India, Blackstone, said after the deal was announced.
“The transaction is core to Blackstone’s India plans as it marks our first investment in the non-banking financial company (NBFC) sector that has been facing some headwinds in recent months."
Aadhar Housing is among a growing number of domestic NBFC and home financiers who are reaching out to PE firms to raise long-term capital due to a liquidity crunch and rising cost of capital in India. Industry watchers say the current situation is opportune for PE funds looking to invest in NBFCs since valuation expectations for the sector, as a whole, have moderated considerably after the crisis at Mumbai-based infrastructure lending giant Infrastructure Leasing & Financial Services (IL&FS) prompted banks and mutual funds, two major sources of funding for NBFCs, to go into a risk-averse mode.
Aadhar Housing was a unit of Wadhawan Global, which also controls DHFL, the company that was in news for alleged financial irregularities.
Stung by the allegations, DHFL has seen a steady decline in its stock and debt papers.
While the company’s share price has slid more than 18% since 25 January, to a low of ₹110.80 on Friday, its listed non-convertible debentures fell close to 12% on concerns over financial health and reports of a potential regulatory probe.
Aadhar Housing had assets under management of ₹7,966 crore as on 31 March 2018.