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Funding to the country’s two largest HFCs fell 13%, partly because of HDFC Ltd’s ability to raise funds from other avenues. Photo: Pradeep Gaur/Mint
Funding to the country’s two largest HFCs fell 13%, partly because of HDFC Ltd’s ability to raise funds from other avenues. Photo: Pradeep Gaur/Mint

Warburg Pincus to buy HDFC’s Good Host Spaces stake

In a regulatory filing on Wednesday night, HDFC said it has entered into a share purchase agreement for sale of its 24.48% stake in Good Host for 232.81 crore

A Warburg Pincus affiliate is set to buy mortgage financier HDFC Ltd’s stake in Goldman Sachs Group Inc.-backed student housing startup Good Host Spaces Pvt. Lt, said a person familiar with the development.

In a regulatory filing on Wednesday night, HDFC said it has entered into a share purchase agreement for sale of its 24.48% stake in Good Host for 232.81 crore. HDFC however didn’t disclose the name of the buyer.

The stake sale will take around four months to be completed upon mandatory approvals, HDFC said.

Goldman Sachs continues to be the majority shareholder with 75% stake in Good Host Spaces.

“Warburg Pincus is buying HDFC’s stake and will also put in additional growth capital going forward. The student living business is a capital extensive business and Good Host has a significant expansion pipeline. The capital will help in developing the pipeline," the person above said, asking not to be named.

HDFC had acquired stake in Good Host in August, 2018 for around 69.5 crore. After the stake sale, Good Host will cease to be an associate company of HDFC.

Spokespersons from Warburg Pincus, Goldman Sachs and Good Host Spacesvdeclined to comment.

Good Host, which is one of the largest providers of student housing with around 18,000 beds in Bengaluru, Manipal and Jaipur, provides hostel services, guest house services, service apartments and leasing of property for hostel services, and reported a turnover of 112.6 crore in 2019-20.

Last year, it acquired the land and hostel facilities of O.P. Jindal Global University (JGU) based in Sonepat, Haryana, at an enterprise value of 900 crore.

In 2018, an affiliate of Warburg Pincus had entered into a joint venture with Lemon Tree Hotels, a mid-priced hotel chain, to create a co-living platform. It was the investor’s first bet in the co-living space in India through the JV which was expected to invest 3000 crore to build shared, rental housing for both young professionals and students.

As educational institutions remained closed and working professionals returned to their hometowns last year due to the pandemic, the shared living sector was naturally impacted. However, both co-living and student housing operators are seeing early shoots of recovery as workspaces and colleges gradually open.

Nikhil Sikri, CEO of ZoloStays, which offers shared rentals for students and working professionals, said he expects recovery to be faster for student housing even as startups and non-IT firms are opening up and asking employees to return to offices.

“Telangana, Punjab and Karnataka have already allowed colleges to open up. For colleges, it’s a revenue generating source if students return, while for IT companies, it’s a cost-cutting measure if employees work from home," Sikri said.

More importantly, there will be a significant transition and preference of customers towards the organized sector for both co-living and student housing, even if it’s more expensive, he added.

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