Shriram Housing Finance, a subsidiary of Shriram City Union Finance, is actively pursuing a smaller lender in the affordable housing space for acquisition and merger while valuation mismatch may pose a hurdle to the scheme of things.
Talks are on, said managing director Ravi Subramanian.
“There is only one active prospect that we are pursuing, but there again, valuation is a hurdle. I won’t pay recklessly to grow,” he told ET in an exclusive interaction.
The targeted company is likely to be in the Rs 2,000-3,000 crore league.
“The discussions are still going on. But we have to get them to the table at the end of the day… If it works out, it is ok. If it does not, we will be building ourselves,” Subramanian said.
The lender is, in parallel, planning a Rs 1,000-crore capital raise to fund its business growth. This is likely to be in the first quarter of the next fiscal. Shriram City Union Finance, which holds 85% in its housing unit, had infused Rs 500 crore last year into it.
The mortgage lender clocked a 54% year-on-year loan asset growth to Rs 6,546 crore at the end of September and is on track to achieve the Rs 10,000-crore mark by September 2023, well ahead of its earlier target of March 2024, according to the MD.
“That is why we are not willing to bend backwards and make an offer at any valuation,” he said.
It can also leverage the large network of the Shriram group to grow business.
“So there are two independent channels (organic and inorganic), which we are pursuing at full steam,” Subramanian said.
About 35-40% of its business comes from the southern states—Karnataka, Tamil Nadu, Andhra Pradesh and Telangana. Gujarat is another state where it is very strong.
On the proposed capital raising, the official said the company may explore to rope in a new investor.
“Last time we raised money from our existing investors, but this time, we will most likely go outside and discover,” he said.
The company was close to acquiring Fullerton India Home Finance in 2020 before Sumitomo Mitsui Financials eventually bought it, according to people familiar with the matter.
