Apollo Global Management is in advanced talks with L&T Finance Holdings Ltd to acquire real estate loans worth ?8,000-9,000 crore. The L&T Group company is looking to pivot toward the retail segment by pruning its infrastructure and real estate exposure, they said.
The deal, pegged at $1 billion, will also will help L&T get cash upfront instead of through staggered payments, allowing it to deleverage its balance sheet, while the private equity group gets a portfolio of real estate assets with some first-loss protection as well as building a relationship with the engineering giant.
The transaction is expected to get finalized in a few weeks and will be carried out via a newly floated alternative investment fund (AIF) structure and will be similar to Apollo's deal with Piramal Capital & Housing Finance, part of Piramal Enterprises.
The real estate book of listed L&T Finance shrank to ?11,210 crore in FY22 from 12,945 crore in the previous fiscal year. Parent L&T owns 66.26% of the financial services arm.
Under the plan, the debt outstanding on the L&T Finance real estate book will be refinanced either through bonds or non-convertible debentures (NCDs) and move to the AIF that will be owned by both Apollo Global and L&T Group. These loans have a 15-16% rupee return on average. Shardul Amarchand Mangaldas and Trilegal are the legal advisors.
L&T Finance has already embarked on the chosen strategy of becoming a retail finance company and in that direction, limiting the exposure to the wholesale finance business in general and to the real estate finance business in particular.
