TPG, Bain and Baring in talks for Canara Bank’s stake in homes
The bracket private equity funds including TPG Capital Management, Bain Capital and Baring Private Equity Asia are in initial talks to buy state-run Canara Bank’s 30 per cent stake in its listed housing finance subsidiary, Can Fin Homes, as the Bengaluru-based lender tries to improve its capital base.
The transaction is coming at a time when the government is trying to infuse a record Rs 2.11 lakh crore capital in state-run lenders as part of a strategy to improve their financials. Can Fin Homes’ market capitalisation stood at Rs 6,408.82 crore on Wednesday. Its stock gained 0.18 per cent to close at Rs 479.90 on the Bombay Stock Exchange, which means the 30 per cent stake of Canara Bank is valued at Rs 1,922 crore. Canara Bank slipped 2.38 per cent to close at Rs 354.95.
Canara Bank has hired New York based investment bank Jefferies LLC to run a formal process to find a buyer, multiple sources with direct knowledge of the matter told ET.
“The stake sale will happen with one buyer or multiple buyers and may happen in tranches,” said one of the sources cited above. “We have hired bankers and they have in turn approached some big-ticket funds, which expressed interest.”
In October, the government had announced a Rs 2.11-lakh-crore capital infusion plan for state-owned banks to encourage lending and boost investment.
However, in a regulatory filing on November 22 last year, Canara Bank said it got approval from its board of directors to sell stakes in its asset management and housing finance units, either fully or partially, to augment resources and improve the capital base.
Set up in 1987 as a wholly-owned subsidiary of Canara Bank, Can Fin has 132 branches, 20 affordable housing loan centres and 20 satellite offices spread across the country. With a loan book of Rs 14,456 crore, the company registered a 36.19 per cent growth in its September quarter net profit at Rs 74.99 crore while the percentage of gross non-performing assets (NPA) remained one of the lowest in the industry at 0.40 per cent.
In talks for Can Fin Homes
“Can Fin Homes enjoys the best asset quality among housing finance companies in India,” Edelweiss Securities said in a note on November 27. “Cost of Borrowings leadership, best-inclass asset quality, minimal impact from GST/RERA and superlative operational expenditure control will combine to deliver high return-on-equity profile of 21-23 per cent over FY18E-20E,” it said.
In March 2017, Canara Bank had sold 13.45 per cent in Can Fin Homes to Government of Singapore Investment Corp for Rs 753.77 crore.
Housing finance has been one of the key investment areas for bigticket private equity funds. Both Baring Asia and TPG had made a failed attempt to buy ICICI Home Finance, the housing finance subsidiary of ICICI Bank in 2016.
Carlyle Group has acquired 49 per cent stake in PNB Housing Finance in 2015, while Sequoia Capital and West Bridge invested in Gruh Finance in the same year.