Shriram Finance stock surges over 5% on Warburg Pincus investment deal

Shriram Finance's stock rose over 5% upon news of the sale of its housing finance arm to Warburg Pincus for Rs 4,630 crore. Warburg will invest an additional Rs 1,000 crore in Shriram Housing Finance, enabling Shriram to focus on vehicle and small business lending. The deal values SHF at Rs 4,630 crore and involves the sale of Shriram Finance's 83.8% stake and Valiant's 14.8% stake. Shriram Finance has seen a 22% internal rate of return on its investment in SHF.

Shares of financial services firm Shriram Finance on Tuesday climbed over 5 per cent after the company announced the sale of its housing finance arm to private equity major Warburg Pincus for Rs 4,630 crore, to focus on vehicle finance and small business lending.

The stock advanced 5.13 per cent to Rs 2,419 on the BSE.

At the NSE, it climbed 5 per cent to Rs 2,417.85 apiece.

Warburg is committed to investing another Rs 1,000 crore in the 2011-incorporated Shriram Housing Finance (SHF) after the closure of the deal, which is expected by the end of this fiscal, in March 2025, Shriram's executive vice chairman Umesh Revankar told PTI.

SHF has grown at a compounded annual rate of over 50 per cent and the Shriram group wishes to focus on its mainstay of small business and vehicle lending rather than pumping capital into the company, Revankar added.

He said Shriram Finance has made an internal rate of return of 22 per cent on the capital deployed in SHF.

Shriram Finance owns 83.8 per cent of SHF, while 14.8 per cent is with PE player Valiant, which is also divesting its stake in full, and the remaining 1.4 per cent is with employees.

Under the deal, SHF would be acquired by Warburg Pincus through its affiliate Mango Crest Investment Ltd from all the sellers.

''The proposed transaction is valued at Rs 4,630 crore for equity and convertible instruments of SHFL,'' Shriram Finance said in a regulatory filing on Monday.

Shriram Finance is one of India's leading Non-Banking Financial Companies (NBFCs), serving over 84 lakh customers across India offering commercial vehicle loans, two-wheeler loans, and Micro, Small and Medium Enterprises (MSME) financing.

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