In a significant shift for India's financial sector, Vikram Pandit, former CEO of Citigroup, is exiting the real estate financing business he co-founded. INH Mauritius, managed by Pandit, is selling its 49% stake in JM Financial Credit Solutions (JMFCS) to JM Financial for approximately INR 3,000 crore (USD 420 million). This acquisition raises JM Financial's ownership in JMFCS to 96%. The move reflects challenges in the real estate sector, with JMFCS' valuation lower than its reported net worth of INR 4,200 crore (USD 590 million). Additionally, JMFCS will acquire a 72% stake in an asset reconstruction company for INR 856 crore (USD 120 million), aiming to capitalise on distressed debt recovery opportunities.
In a significant shift for India's financial sector, Vikram Pandit, the former CEO of global banking giant Citigroup, is stepping away from the real estate financing business he co-founded.
INH Mauritius, an investment fund managed by Pandit, is selling its entire 49% stake in JM Financial Credit Solutions (JMFCS) to JM Financial, an Indian financial services firm. This deal, valued at approximately INR 3,000 crore (USD 420 million), will see JM Financial significantly increase its ownership of JMFCS to 96%.
The move marks Pandit's exit from JMFCS, where he served as chairman. His business partner, Hariharan Aiyar, will also step down from the board following the change in ownership structure.
This transaction comes as INH Mauritius nears the end of its investment cycle. The fund initially invested INR 950 crore (USD 133 million) in JMFCS in 2015, followed by additional investments in 2017 and 2018. Notably, the deal valuation for JMFCS is lower than its reported net worth of INR 4,200 crore (USD 590 million). Industry sources suggest this discrepancy reflects challenges in the real estate sector that have impacted loan recovery rates for JMFCS.
JM Financial, on the other hand, is strengthening its presence in the real estate financing space through this acquisition. The company plans to finance the INR 3,000 crore deal using its strong internal reserves, which currently exceed INR 4,000 crore (USD 560 million). This demonstrates JM Financial's confidence in the long-term potential of the real estate sector.
In a separate transaction valued at INR 856 crore (USD 120 million), JMFCS will acquire a majority stake (72%) in an asset reconstruction company (ARC) from JM Financial. This move will increase JMFCS' ownership in the ARC to 82%. ARCs specialise in purchasing distressed debt from banks and financial institutions, aiming to recover the loans. By expanding into this area, JMFCS is potentially positioning itself to capitalise on opportunities arising from non-performing loans in the Indian market.
This series of transactions highlights the evolving landscape of India's financial sector. While Pandit exits the real estate financing business, JM Financial is strategically expanding its presence in this segment and in debt resolution through ARCs. The future performance of JMFCS will be closely watched as the company navigates the challenges in the real estate sector while exploring new opportunities in debt resolution.
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