MUMBAI: Local private equity fund Multiples Alternatives, along with a clutch of former senior bankers, will invest over Rs 100 crore in Mumbai-based housing finance firm Vastu Housing Finance Corp to own 95% stake in the start-up firm relaunched by senior bankers.
This underscores the growing interest of private equity investors in financial services companies, especially in housing finance companies, which is considered a safe bet among the other riskier lending businesses.
Multiples, which will own 80% stake in the firm, has already committed to invest roughly Rs 400 crore in the next four years to grow the business, while three former bankers — Pramod Bhasin, Samir Bhatia and Vikram Gandhi — will own 15%, while 5% will be with the founders PH Ravikumar, former CEO of NCDEX, Sandeep Menon, a former banker with Barclays and Standard Chartered and Sujay Patil.
“Multiples has pumped in about Rs 80 crore for this buyout,” said a person involved in the deal. Vastu will provide loans up to ticket sizes of Rs 50 lakh, but its key focus will be in loans of ticket sizes between Rs 10 and Rs 15 lakh.
“At Multiples, we have always tried to invest behind a strong macro and a management team best positioned to build a sustainable business,” said Renuka Ramnath, founder and CEO of Multiples. “We continue to have a strong interest in the mortgage finance space and believe that the asset class will be a key beneficiary of the strong economic growth projected, going forward.”
The fund is in the process of raising $600 million towards its second fund. This, say experts, will be the first deal from the new fund which saw a first close at $300 million earlier this year. The fund will soon announce its final close, people familiar with the plan said.
‘Many people from low income segment of the population who do not have access to informal sources of income but are unable to take loans due to non-availability of credit history and hence their tendency to go to informal lenders,” says Pramod Bhasin. “Vastu is addressing this gap through its unique ability to acquire and underwrite large volumes of such customers by using a combination of technology and the traditional distribution model.”
Ravikumar, Menon and Patil along with PE funds had purchased Vastu Housing Corp in June 2015 for Rs 2.5 crore and have decided to scale it up with support from PE funds and experienced bankers. The start-up, with a new management and capital base, will use technology to reach out to potential customers and ensure a seamless loan disbursal. The company will now build the sales force, the team and branch network afresh, and in its new avatar, is expected to have a loan book of Rs 6,000 crore by 2021.
Vikram Gandhi serves as the senior advisor to Canadian Public Pension Fund, Pramod Bhasin is the founder of GE Capital and former CEO of Genpact, and Samir Bhatia was one of the former managing directors of Barclays in India.
“Lack of access to finance is one of key deterrents of growth of the affordable housing sector in India…. through the new Pradhan MantriAwasYojana (PMAY), the National Housing Bank (NHB) has been proactively working with housing finance companies (HFCs) to deploy an interest subvention subsidy for low income groups,” said Gandhi.
The affordable housing segment is expected to see a geometric growth over the next few years. The total housing loans in India today stand at $250 billion and is expected to hit $600 billion by 2020.
”Vastu will be a highly technologically driven HFC, which will make it easier and quicker for consumers to take loans at competitive prices. Vastu will focus on the affordable housing segment, which is the aspirational, digital India,” says Samir Bhatia.