India

Centrum Group targets INR 1,300 crore valuation as it nears sale of housing finance subsidiary

Synopsis

The Centrum Group is set to complete the sale of its housing finance subsidiary, Centrum Housing Finance, by the end of the fiscal year. Currently negotiating with multiple investors, the company is considering either a full sale or a partial stake monetisation, focusing on valuation discussions. Centrum aims for a valuation between INR 1,200 crore and INR 1,300 crore, which is lower than its parent company, Centrum Capital's market capitalisation. With a net worth of INR 450 crore and assets of INR 1,500 crore, the subsidiary has seen strong growth, including a 61% revenue increase to INR 868 crore. The final decision on the sale is expected soon and could significantly impact the burgeoning housing finance market in India.

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The Centrum Group is on track to complete the sale of its housing finance subsidiary, Centrum Housing Finance, by the end of the current fiscal year. The process involves negotiations with several potential investors, and the decision could result in either a full sale or a partial stake monetisation. Discussions have narrowed down to the crucial aspect of valuation, according to sources familiar with the matter.

Centrum is aiming for a valuation between INR 1,200 crore and INR 1,300 crore for the housing finance subsidiary. This valuation is slightly lower than the current market capitalisation of its parent company, Centrum Capital, which indicates the competitive nature of the negotiation. Jaspal Bindra, executive chairman of Centrum Group, shared that the company is currently in discussions with multiple parties, with talks now concentrating on due diligence and valuation.

Currently, Centrum Housing Finance has a net worth of INR 450 crore and manages assets totaling INR 1,500 crore. The interest from investors spans a range of options, including a complete acquisition or a majority or minority stake sale. Bindra emphasised that the final decision will depend significantly on the proposed valuations and the nature of the counterparty involved.

Centrum has a history of strategic moves to enhance its business portfolio. In 2022, the group transferred most of its lending operations to Unity Small Finance Bank, which is 51% owned by Centrum, while retaining its housing finance subsidiary due to its ownership structure involving Morgan Stanley, which holds a 25% stake. This arrangement reflects the complexities of ownership in the financial services sector.

Established in 2017, Centrum Housing Finance grew through the acquisition of National Trust Housing Finance (Natrust) in December 2022, expanding its reach into southern India. The group's consolidated revenue jumped to INR 868 crore by the end of September, marking a significant 61% increase from INR 537 crore in the previous year. Additionally, its EBITDA rose by 68% during the same period to reach INR 401 crore, signalling strong operational performance.

As the deadline to finalise the sale approaches, the Centrum Group appears well-positioned. The housing finance sector in India has been witnessing robust growth, driven by rising demand for home loans. Investors are keenly interested in companies that can navigate the evolving market landscape, which may play a role in shaping the final outcomes of this sale process.

In conclusion, the upcoming sale of Centrum Housing Finance is a significant move for the Centrum Group, reflecting its broader strategy within the financial services industry. As discussions continue, the outcome will undoubtedly attract attention from various stakeholders in the financial community. The decision, expected before the end of this fiscal year, will be critical not just for Centrum but also for investors looking to tap into the expanding housing finance market in India.

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