Shriram Finance Climbs 2% On Sale Of Housing Finance Arm To U.S. Investment Firm

Shares of Shriram Finance were climbing on Tuesday after the firm said it was selling its housing finance arm to a private equity player.

What Happened: Shriram Finance’s board gave the green light to sell its entire stake in subsidiary Shriram Housing Finance (SHFL) to Warburg Pincus. Warburg Pincus said it will acquire the stake through its affiliate Mango Crest Investment from all the sellers involved.

As a part of this transaction, Mauritius-based Valiant will also completely divest its equity stake to Warburg Pincus.

The deal, worth ₹4,630 crore, is contingent on regulatory approvals and other standard conditions. Once the transaction is finalised, SHFL will no longer be a subsidiary of Shriram Finance.

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Continuing Mangement And Growth: SHFL’s current management team, under the leadership of Ravi Subramanian, will continue to steer the business.

Warburg Pincus had previously been reported to be the frontrunner to acquire the business in a bidding war with Bain Capital.

Analyst View: Citi said Shriram Finance’s 85% stake was valued at ₹96 per share, which is lower than the brokerage’s estimate of ₹140 per share.

Citi said that Shriram Finance selling its entire stake implies that the firm was more keen on deploying capital in its core business.

Kotak Securities maintained its “buy” rating for the stock with a price target of ₹3,000. The brokerage said that it remains strongly bullish on the company’s core business. “The core business remains on track with strong asset quality performance providing conviction on sustaining high growth,” the brokerage added.

Price Action: Shriram Finance’s share price was up 1.95% at ₹2,346.65 in early trade on Tuesday.

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