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JM Financial to increase stake in Credit Solutions and sell 71.79% stake in ARC | Company News
To acquire an additional 49% stake in JM Financial Credit Solutions
Photo: X @JMFSLtdAbhijit Lele Bombay
As part of the intra-group reorganisation, BSE-listed JM Financial Ltd will further acquire 48.96 per cent stake in INH Mauritius 1’s subsidiary JM Financial Credit Solutions Ltd (JMFCSL) in one or more tranches. In the first tranche, it would acquire 42.99 per cent stake in JMFCSL for about Rs 1,282 crore, taking the stake to 89.67 per cent. The stake will further increase to 95.64 per cent on completion of the entire transaction.
Also in another transaction, JM Financial would offload its 71.79 per cent stake in JM Financial Asset Reconstruction Company Ltd (JMFARC) to JMFCSL for a consideration of Rs 856 crore. Currently, JM Financial Credit Solutions Ltd holds 9.98 per cent stake in ARC.
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Both transactions are subject to necessary approvals and signing of necessary definitive agreements between the parties, JM Financial told BSE on Saturday.
Elaborating on the rationale for increasing stake in JM Financial Credit Solutions, the company said the proposed acquisition provides the ability to leverage its talent pool to significantly grow the distribution and syndication business across asset classes. The company’s share of consolidated profits is expected to increase and have enhanced control of JMFCSL, including capital allocation and profit distribution, it added.
Vishal Kampani, Non-Executive Vice Chairman of JM Financial, said the Proposed Transaction will align our corporate and capital structure, providing greater flexibility to optimize capital allocation and distribution of profits to shareholders. “We anticipate significant long-term growth opportunities emerging for our business and are well positioned to leverage them in the evolving market landscape,” he added.
In May 2024, JM Financial said it was considered prudent to refocus expertise in the Wholesale Credit Business, shifting from the on-balance sheet business model to syndicated transactions for investors. It would build large-scale sales and distribution teams in the private credit and alternatives space.
JMFCSL is registered with the Reserve Bank of India (RBI) as a non-banking financial company (NBFC) and is classified as a middle-tier NBFC as per the scale-based Regulations issued by the regulator. The company, which is into mortgage lending business, reported a revenue of Rs 1,305 crore with a net profit of Rs 47 crore in FY24. The outstanding loan book stood at Rs 7,462 crore at the end of March 2024.
As for the asset reconstruction unit, JM Financial said in a statement that it will consolidate the distressed credit business under its wholesale debt syndication platform, JMFCSL. The platform is expected to leverage the experience of its talent pool through different economic cycles to achieve higher risk-adjusted returns. Upon completion of the Proposed Sale, JM Financial Ltd’s equity interest in JMFARC will become “Nil”.
The asset reconstruction firm reported a revenue of Rs 344 crore. It posted a net loss of Rs 942 crore after a provision of Rs 846.86 crore for expected credit loss on distressed loans in FY24. ARC’s assets under management (AUM) stood at Rs 14,500 crore as of March 31, 2024.