Chief executive Gagan Banga said the company will get an enabling resolution to give a board seat to any significant financial shareholder in the company, which could in the next few months translate into a strategic stake. Another attempt at getting a banking licence is also an option as the company will now be controlled by a diversified set of investors with no links to any group, he said.
Last week, Gehlaut reduced his stake to 9.8% from 21.69% through a block deal, which was subscribed among others by US private equity giant Blackstone, sovereign wealth fund Abu Dhabi Investment Authority (ADIA), HSBC and local mutual funds Invesco and Quant Capital.
Blackstone owns 3% in IHF while ADIA has 2% after the share purchase. Banga said Gehlaut’s reduction of stake below 10% will allow him to start the process of formally stepping down as promoter and it improves the company’s prospects.
“By just doing this small thing of us not being part of any group and not having an identifiable promoter has opened up infinite possibilities for us… we can now work towards getting a strong strategic promoter. We are talking to a few large institutional investors for a strategic stake,” Banga said.
He acknowledged that Blackstone could be a part of the discussions but said talks are ongoing with a bunch of investors. Blackstone is also currently in the final leg of completing the takeover of Indiabulls Real Estate in partnership with Bengaluru-based Embassy Group, shareholder approval for which is expected next month.
As part of IHF’s plan to derisk its business, the company will apply to the Securities and Exchange Board of India (Sebi) to launch two credit funds under the alternative investment funds (AIF) route with two global investors, one for residential projects and another for commercial.
“The two credit funds will help us take advantage of the wholesale lending opportunity without exposing the capital of the NBFC. These will be 100% subsidiaries of IHF and the profits from these funds will still flow back to the NBFC. We will put in 10% while our partner fund will put in 90% in the funds,” Banga said.
Tapping the opportunity in developer financing will put the company back on the growth path and arrest the fall in assets, he said.
The collapse of IL&FS and the resultant liquidity squeeze for NBFCs also impacted IHF. From a loan book of ₹1.23 lakh crore at the end of fiscal 2018, the company’s loan book came down to ₹65,438 crore at the end of the quarter ended June 2021, out of which ₹16,000 crore are developer loans. Even though the capital adequacy ratio of 30.65%, more than double the regulatory mandate, increased competition from banks and higher cost of funds have posed fresh challenges in the last three years.
Banga said the company is forgoing a profit opportunity of ₹300 crore to ₹400 crore per year because of its aversion to developer loans. “We were making about ₹1,500 crore by lending to developers and we can get back to make ₹700 crore to ₹1,000 crore within two to three years through these credit platforms. This will help us achieve a return on equity (RoE) of 15% by fiscal 2024 and get back to contributing 40- 45% to our profit from that business without exposing our capital.”
