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
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.
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.