JM Financial consolidates wholesale credit, ARC biz under one platform
The Board of Directors of JM Financial Ltd at its meeting held on 6 July 2024 approved the acquisition of 42.99% stake in JM Financial Credit Solutions Limited (JMFCSL), a systemically Important Non-Banking Financial Company primarily engaged in the business of extending wholesale credit to developers of real estate projects, for a consideration of Rs 1,282 crore.
After the transaction, the stake held by JM Financial Ltd in JMFCSL will increase from 46.68% to 89.67%.
The board also approved the acquisition of 71.79% stake in JM Financial Asset Reconstruction Company Limited (JMFARC) by JMFCSL from JMFL for a consideration of approximately Rs 856 crore. Post transaction the stake held by JMFCSL in JMFARC will increase from 9.98% to 81.77%.
The proposed transaction will result in a net cash outflow of approximately Rs 426 crore from JM Financial Ltd. The same will be funded from surplus cash. The proposed transaction is subject to applicable regulatory, shareholders and other approvals and is expected to be completed in 3-6 months.
In a press statement the company said that strategic rationale for the proposed transaction is to consolidate the distressed credit business under its wholesale debt syndication platform, JMFCSL.
The platform will leverage the experience of its talent pool through different economic cycles to achieve higher risk adjusted returns.
“Over the last 15 years, JM Financial Group has developed significant expertise and relationships both in the wholesale and distressed credit businesses. This expertise shall be channelized to pivot from an on balance sheet business model to a diversified originate to distribute / syndication model across asset classes,” said the company in a statement.
The transaction will result in JM Financial Group’s ownership in JMFCSL increasing to 89.67%. The Group’s share in the consolidated profits will accordingly increase and JMFL shall have enhanced control of JMFCSL including capital allocation and distribution of profits.
After the aforesaid consolidation of shareholding, JMFL’s investments will primarily be towards the expansion of both, its retail capital market led business (retail broking, wealth management and asset management) and retail home financing business.
Commenting on the Proposed Transaction, Vishal Kampani, Non – Executive Vice Chairman, JM Financial Limited, said: “The proposed transaction shall align our corporate and capital structure offering greater flexibility to optimise capital allocation and distribution of profits to our shareholders. We foresee significant long term growth opportunities emerging for our businesses and are well positioned to leverage them in the evolving market scenario.”
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