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As part of reorganization within the group, BSE-listed JM Financial Ltd will further acquire 48.96 per cent in subsidiary JM Financial Credit Solutions Ltd (JMFCSL), from INH Mauritius 1 in one or more tranches. In the first tranche, it would buy 42.99 per cent stake in JMFCSL for about Rs 1,282 crore, taking stake to 89.67 per cent. The stake will rise further 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 consideration of Rs 856 crore. At present, JM Financial Credit Solutions Ltd holds 9.98 per cent stake in the ARC.
Both the transactions are subject to requisite approvals and signing of necessary definitive agreements between parties, JM Financial informed BSE on Saturday.
Elaborating on 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 scale up the distribution and syndication businesses across asset classes. The company’s share in the consolidated profits shall increase and have enhanced control of JMFCSL including capital allocation and distribution of profits, it added.
Vishal Kampani, Non – Executive Vice Chairman, JM Financial said, the Proposed Transaction shall align our corporate and capital structure offering greater flexibility to optimise capital allocation and distribution of profits to shareholders. “We foresee significant long term growth opportunities emerging for our businesses and are well positioned to leverage them in the evolving market scenario”, he added.
In May 2024 JM Financial had said that it was thought prudent to re-focus expertise in the Wholesale Credit Businesses by pivoting from on-balance sheet business model to syndicating transactions to investors. It would build large scale sales and distribution teams in the private credit and alternatives space.
JMFCSL is registered with Reserve Bank of India as a non-banking finance company (NBFC) and is classified as a Middle Layer NBFC in accordance with the Scale Based Regulations issued by the regulator. The company, which is into mortgage lending business, posted a revenue of Rs 1,305 crore with net profit of Rs 47 crore in Fy24. The outstanding loan book was Rs 7,462 crore at the end of March 2024.
As for the Asset reconstruction unit, JM Financial in a statement said consolidating the distressed credit business under its wholesale debt syndication platform, JMFCSL. The platform shall leverage the experience of its talent pool through different economic cycles to achieve higher risk adjusted returns. Post completion of the Proposed Sale, the shareholding of JM Financial Ltd in JMFARC shall become “Nil”.
The asset reconstruction company had posted a revenue of Rs 344 crore. It posted a net loss of Rs 942 crore following a provision of Rs 846.86 crore for expected credit loss on distressed loans in FY24. The assets under management (AUM) of the ARC stood at Rs 14,500 crore as of March 31, 2024.
First Published: Jul 06 2024 | 8:19 PM IST