PE True North to Buy Big Stake in HFFC

Pri­vate eq­uity firm en­ters into a bind­ing agree­ment to ac­quire ma­jor­ity stake for .₹ 600 crore, valu­ing the mort­gage firm at $150-175 m; pro­posed trans­ac­tion to in­volve sec­ondary sale by ex­ist­ing share­hold­ers and fresh is­sue

The Economic Times - - Companies: Pursuit Of Profit - @times group.com

New Delhi: Home­grown pri­vate eq­uity firm True North, for­merly In­dian Value Fund, has en­tered into a bind­ing agree­ment to ac­quire a ma­jor­ity stake in Home First Fi­nance Com­pany (HFFC) for about $100 mil­lion (.`600 crore), valu­ing the mort­gage firm at $150175 mil­lion, said a per­son in­volved in the trans­ac­tion. HFFC, pro­moted by for­mer Mpha­sis chair­man Jaithirth (Jerry) Rao and PS Jayaku­mar, for­mer Citibank Con­sumer bank­ing head, is pri­mar­ily en­gaged in fund­ing af­ford­able hous­ing. Set up in 2010, the com­pany aims to serve the mort­gage needs of low and mid­dle in­come cus­tomers pur­chas­ing first homes. The com­pany has dis­bursed home loans worth more than .₹ 1,000 crore to over 10,000 fam­i­lies in 30 cities.

The pro­posed trans­ac­tion in­volves a sec­ondary sale by ex­ist­ing share­hold­ers and fresh is­sue, said the per­son cited above. HFFC raised cap­i­tal from Besse­mer Ven­ture Part­ners and Tata Cap­i­tal Growth Fund in ear­lier rounds, giv­ing them a 45-50% hold­ing. Rao and Ja- yaku­mar to­gether have about 40% and the rest is with man­age­ment under the lead­er­ship of CEO Manoj Viswanathan.

Out of $100 mil­lion, True North will in­vest about half in the com­pany and the rest will be paid to the ex­ist­ing share­hold­ers, said the per­son cited above. The two sides con­firmed the deal but de­clined to give de­tails, such as the amount in­volved or the val­u­a­tion.

EARLY MOVERS

HFFC lever­ages tech­nol­ogy in­tel­li­gently to en­sure a qual­ity cus­tomer ex­pe­ri­ence, Rao said. Viswanathan said, “True North has a great rep­u­ta­tion for in­vest­ing in mid-sized en­ti­ties like HFFC and nur­tur­ing them into in­dus­try lead­ers. We want to con- tinue our bias to­wards us­ing tech­nol­ogy to cre­ate in­no­va­tive prod­ucts and pro­cesses for hous­ing fi­nance cus­tomers in In­dia.”

Divya Se­h­gal, part­ner at True North, said, “We have been keen to par­tic­i­pate in the mas­sive op­por­tu­nity be­ing of­fered about by the In­dian af­ford­able hous­ing sec­tor. We be­lieve that HFFC has a unique team and cul­ture of do­ing busi­ness in a very trans­par­ent and so­cially re­spon­si­ble man­ner.”

Since in­cep­tion, the HFFC team has been able to grow the busi­ness at a com­pounded an­nual growth rate of more than 50% by lever­ag­ing tech­no­log­i­cal tools, Se­h­gal said, adding, “We are very ex­cited about the prospect of sup­port­ing the HFFC team in build­ing a lead­ing and so­cially re­spon­si­ble af­ford­able hous­ing fi­nance busi­ness in In­dia.”

It is not known whether Besse- mer, Tata Cap­i­tal and the two founders will exit com­pletely.

“Be­sides True North, the man­age­ment will have a 10% stake in the com­pany and bal­ance about 30% will be with th­ese in­vestors,” said the per­son cited above.

The in­vest­ment in HFFC will be from its fifth fund – True North V, a $700 mil­lion fund that was launched in April 2015 with a life of 12 years. In­clud­ing this round, it would have in­vested about $400 mil­lion.

True North is one of the early movers in the In­dian PE space and is pri­mar­ily en­gaged in the mid-mar­ket seg­ment for the last 17 years with more than .₹ 8,000 crore in­vested in about 30 busi­nesses. The com­pany cur­rently has a port­fo­lio of 15 com­pa­nies in which it has in­vested about .₹ 5,500 crore from var­i­ous funds. In­vest­ments in­clude deGustibus Hos­pi­tal­ity, which owns and op­er­ates restau­rant brands Indigo and Indigo Deli, non-bank­ing fi­nan­cial com­pany Magma Fin­corp Ltd, and seed com­pany SeedWorks In­ter­na­tional. It has also in­vested in five firms in the health­care sec­tor.

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