Reliance Capital Ltd (RCap) is in talks with four firms to sell a majority stake in its unit Reliance Home Finance Ltd that may also include divesting ownership control to the new partner, said three people familiar with the matter.
The talks are taking place with investment firms Varde Partners Inc., AION Capital and Cerberus Capital Management and non-banking financial company (NBFC) Altico Capital India Ltd, said the people cited above, requesting anonymity.
Reliance Home Finance currently has a loan book of ₹11,000 crore. It comprises around ₹4,500 crore of retail loans and ₹6,500 crore of wholesale loans.
“The company is in an advanced stage of discussions with two of these firms. It is keen to close the deal as soon as possible. The plan is to sell a stake in the company and then by 2020, wind down the wholesale lending business, and eventually, it is the retail housing finance business that will stay on," said the first person cited above.
“Reliance Capital will also remain as a significant minority shareholder."
A Reliance Capital spokesperson declined to comment. “Housing finance complements our wholesale lending business. The valuations of housing finance companies were quite high earlier, unlike today, when there are opportunities and platforms available at reasonable valuations," said Sanjay Grewal, chief executive, Altico Capital.
“Our strategy to enter the housing finance business is not a reaction to what has transpired in the NBFC space in recent months, but this is an opportune time to enter this space".
Altico is also in talks with a few other home financiers.
Spokespersons for Varde Partners and AION Capital declined to comment, while Cerberus Capital didn’t respond to queries.
Altico’s strategy to diversify into housing finance and other sectors is to primarily de-risk its investments, which have been dependent on the real estate sector. On 30 April, Mint had reported that RCap has drawn up plans to raise up to ₹10,000 crore through stake sales as the diversified financial services company seeks to cut its debt amid a string of rating downgrades. The Anil Ambani group firm plans to sell up to a 51% stake each in its wholly-owned non-banking financial companies—Reliance Home Finance and Reliance Commercial Finance and in two media companies—Codemasters and Prime Focus, the report said.
The NBFC sector has been going through a tumultuous period after Infrastructure Financing & Leasing Services Ltd (IL&FS) defaulted on some of its debt obligations last year. Since then, most real estate-focused NBFCs have slowed down deployment to real estate projects and companies.
Finally, finance minister Nirmala Sitharaman, last week, announced National Housing Bank’s fresh liquidity window for housing finance companies.
The scheme called Liquidity Infusion Facility (LIFt) offered ₹10,000 crore for housing financiers for lending to individuals for purchasing affordable homes.
Reserve Bank governor Shaktikanta Das said last week that the central bank has identified 50 large non-banks, including some housing finance companies, and is monitoring them and that it is trying to ensure that there is no collapse of any large systematically large NBFCs.