Indostar Capital Finance is negotiating to acquire as much as a 70% stake in ICICI Home Finance, the mortgage lending unit of ICICI Bank which has had other suitors as well in the past, people familiar with the matter said.
The non-banking finance company funded by private equity firm Everstone Capital has offered to pay Rs. 2,000 crore for the stake, one of them said. But they have yet to sign on the dotted lines. At that price, ICICI Home Finance’s value will be nearly Rs. 3,000 crore.
This is the third attempt by ICICI Bank to sell its home finance unit. Earlier, the bank was close to selling the entire company to private equity fund India Value Fund Advisors and Baring Asia. Prior to that, PE firm TPG had offered to buy the mortgage unit. “ICICI Bank has been receiving proposals from interested parties regarding its stake in ICICI Home Finance Company. However, no proposal has been taken to the board of directors of the bank for consideration,” an ICICI Bank spokesperson said in response to ET’s emailed query. Indostar declined to comment. Indostar, under chief executive R Sridhar who joined the company earlier this year, is trying to quicken growth across its lending business. Its investors also include Goldman Sachs and ACPI Investment Managers. The company commenced operations in 2011 and has grown at a steady pace: as on March 31, 2017, it had a net worth of Rs. 1,903 crore. It offers tailor-made financial services to meet specific customer requirements in the form of secured term finance to corporates and SME borrowers. IndoStar also has a 100%-owned home finance subsidiary, IndoStar Home Finance, which received the licence in August last year. Consolidation has started among the non-banking financial companies driven by private equity funds, which expect heavy returns as more Indians join the financial inclusion programme. Industry estimates put the growth in NBFCs at around 20% for the next five years due to the government's focus on building roads, ports, smart cities and homes. Meanwhile, growth is slowing down for some housing finance companies. “After almost a decade of gaining market share from banks, HFCs have started slowing down,” said Antique Institutional Equities analyst Digant Haria. “Well-established HFCs have started witnessing slowness in their core business, partly due to increasing competition from banks and partly on account of scores of new HFCs entering the housing finance arena aggressively.”
