Five years after investing into ace deal maker Nimesh Kampani's non-banking finance company (NBFC) for real estate investing, former Citigroup CEO Vikram Pandit, Govt of Singapore Investment Corp (GIC), and promoters of JM Financial Services are putting in about Rs 875 crore in JM FInancial Credit Solution.
The fund infusion into the NBFC of the Mumbai-based investment banking firm comes when the sector in India is facing a perceived downturn.
As per the agreement, Pandit and GIC together will invest 50 percent of the fresh capital, while JM Financial (JMFL) will invest Rs 225 crore. The rest is the capital raised from university endowments such as University of California Endowment Fund and large foreign institutions, said one of the sources briefed about the transaction.
The fund-raise is at a post-money equity valuation of up to Rs 7,175 crore.
The transaction shall increase the net worth of JMFCSL by 50% and further strengthen the balance sheet of JMFCSL to meet its growth requirement, the Mumbai-based firm said in a statement.
JMFL will retain board and management control of JMFCSL.
Vikram Pandit, who was chief executive of Citigroup from 2007 to 2012, has previously invested Rs 540 crore in the company in 2014. After his five-year stint in Citi, Pandit, who hails from Nagpur, has invested in JM and bought a three percent stake in JM Financial. In 2014, he has joined JMs NBFC as non-executive chairman.
Singapores GIC is one of the largest sovereign investors in India. GIC entered the Indian real estate market over a decade ago, but has turned aggressive only recently and has been actively picking up stakes in properties and forming alliances with Indian developers for future developments. Its exposures in Indian realty space include a stake in DLFs rental arm, and alliances with Godrej Properties, Bengaluru-based Pestige Estates and Brigade Enterprises. It also owns the majority stake in a 2.2-million-sq-ft commercial complex Nirlon in Mumbais Goregaon.
JM has raised Rs.1,379 crore through various equity issuances so far this year. In February, the company raised Rs 650 crore through a qualified institutions placement. In addition, JMFL Group has raised equity funds of Rs 729 crore from external investors in its group companies to further strengthen their balance sheets and capitalize on business opportunities.
The fund-raise is coming at a time when NBFCs have been struggling with liquidity crisis and facing redemption pressures.
“The last few years have seen strong growth performance by NBFCs – fueled by a number of factors: slackness in PSU bank growth appetite, strong loan demand, largely stable retail asset quality and a benign liquidity environment. While most of these factors continue to be supportive, we believe there is reason to expect a turn in the liquidity environment driven by concerns of rising inflation and twin deficits (CAD and fiscal deficit). This is already reflected in rising bond yields recently, and we worry this can undermine the strong NII growth expectations of some of the NBFCs,” Credit Suisse said in a note on Sept 10.
Shares in JM Financial fell 5.3 percent, significantly underperforming the benchmark Sensex, which ended 0.6 percent lower.
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