JM Financial has decided to consolidate its holdings in its wholesale debt syndication and non-performing loan businesses onto one platform.
The company’s board, in a meeting on Saturday, approved JM Financial’s proposal to acquire 42.99 per cent stake in JM Financial Credit Solutions Ltd (JMFCSL) for around Rs 1,282 crore.
Following the transaction, JMFL’s stake in JMFCSL will increase from 46.68% to 89.67%, the company said in a statement.
The board also approved JMFCSL’s acquisition of 71.79% stake in JM Financial Asset Reconstruction Company Ltd. (JMFARC) from JMFL for a consideration of approximately Rs 8,560 crore, which will increase its shareholding in JMFARC from 9.98% to 81.77%.
The proposed transaction will result in a net cash outflow of about Rs 42.6 billion from JMFL, which will be funded from surplus cash.
“The proposed transaction will align our corporate and capital structures and provide us with greater flexibility to optimise capital allocation and profit distribution to shareholders,” said Vishal Kampani, non-executive vice chairman, JM Financial.
“We foresee significant long-term growth opportunities for our business and are well positioned to capitalize on the evolving market scenario.”
The proposed transaction is subject to relevant regulatory, shareholder and other approvals and is expected to close within three to six months.
The company said its share of the group’s consolidated profits will increase accordingly and JMFL will have greater control over JMFCSL, including capital allocation and profit sharing. Post-share combination, JMFL’s investments will be primarily directed towards the expansion of both its retail capital markets led business and retail housing lending business.
JM Financial Group has built significant expertise and relationships in both the wholesale and non-performing loan businesses over the past 15 years. “This expertise will be leveraged in the transformation from an on-balance sheet business model to a diversified origination-to-distribute/syndication model across asset classes,” the company said.
