IndoStar Capital Finance is a major NBFC (non-banking finance company) that is controlled by private equity firm Everstone Capital. IndoStar Capital Finance will now buy a majority stake in ICICI Home Finance at the equity valuation of Rs.3,000 crore for the subsidiary of ICICI Bank.
Everstone Capital will also be investing in this deal. Everstone and IndoStar will jointly own 2/3rds of the entire business. The remaining 1/3rd of the business will be kept with ICICI Bank. ICICI Home Finance is valued by two times of its book value for the last financial year at Rs.3,000 crore. At the end of March, 2017, this home finance company possessed a book value touching Rs.1,584 crore. He also added that this deal was fairly valued since the loan book already has exposure to real estate developers and this typically is valued lower than the retail book as well.
ICICI Home Finance closed the loan book at Rs.8,792 crore for the 2016-17 fiscal. A net profit of Rs.183.2 crore was reported on the back of Rs.1,052 crore revenues for this year. ICICI Bank had previously kept its home finance subsidiary for sale in July 2015 after taking a decision that this was a non-core asset to its overall operations. However, talks did not materialize for a sale to TPG Capital and then the Baring Asia-India Value Fund Advisors duo.
IndoStar will be more of a strategy based buyer who will own the operations and run the same with Everstone providing support like a financial investor. The deal has already been finalized and the official approvals should come in from the board of ICICI Bank pretty soon. IndoStar commenced operations in the year 2011 and by the end of March, 2017, its loan book stood at Rs.5,247 crore with a net non-performing asset ratio of 1.2%. IndoStar also has a net worth of Rs.1,901 crore as estimated in March 2017 and net profits have grown by a whopping 31% (compound annual growth rate) to stand at Rs.210 crore. The company recently started its housing finance business and majorly operates across the small and medium enterprise lending and corporate lending segments. The housing finance division is known as IndoStar Home Finance. IndoStar is aiming at growth of the ICICI Home Finance business to approximately a loan book of Rs.15,000 crore within the first year of operations as per reports.