Shriram Finance selling its Housing Finance to Warburg; But Why?
A Non-Banking Financial Company (NBFC), Shriram Finance has just announced its plans to sell its housing finance biz to Warburg Pincus, a Private Equity Firm (PE), which is a reputed international enterprise. This policy is a part of Shriram’s grand plan to switch its focus to its core business.
The venture of Shriram Housing Finance is about providing home loans; however, with keen competition from banks and other housing companies in the same segment, this cannot be an easy task for Shriram. The housing finance sector is under the grip of large banks and some private companies like HDFC and LIC Housing Finance. Being a lending intermediary that had no large branch network, SHFL was having a hard time competing with other rivals that were mostly well-financed, mainly because of their widespread distribution networks. Shriram Capital has consequently quit this stream and used the cash that would have otherwise been employed in the business for the expansion of the core lending businesses which have better prospects.
With Pincus Warburg throwing in money, Shriram will now be able to focus 100% on its core business. The wager on the housing finance sector as a sustainable anchor of long-term growth may be quite reasonable with its continued growth over time. The objective is to expand the existing business and re-position Shriram Housing Finance to extend loans to borrowers through its digitization, distribution and analytical capabilities. The Private Equity Fund will pay in sum approximately Rs.4630 crore and will buy out Shriram’s housing finance arm. Umesh Revankar, Executive Vice Chairman of Shriram Finance, discussed that this sale is important for the company’s growth for FY 25.
