Ex-Citi chief Pandit to exit Kampani’s fin biz in Rs 3k crore deal

Mumbai: Former Citigroup CEO Vikram Pandit is set to exit the real estate financing business established by veteran dealmaker Nimesh Kampani.
INH Mauritius, an investment fund managed by Pandit, will sell 49% in JM Financial Credit Solutions (JMFCS) — the realty financing business — to Kampani’s JM Financial in a deal valued at about Rs 3,000 crore.Pandit will subsequently step down from the chairman’s position of the mid-tier NBFC.
The move will increase JM Financial’s stake in JMFCS to 96% from 47%. The balance 4% is held by Moraine Master Fund and Aparna Aiyar, the wife of Pandit’s business partner Hariharan Aiyar. Hariharan too will step down from the board of JMFCS following the change in shareholding. JM Financial, which has been restricted from managing debt issues as well as offering loans against shares by regulators due to governance lapses, will buy 43% from INH Mauritius for Rs 1,282 crore in the first phase of the transaction. It will finance the deal through internal accruals which stands at over Rs 4,000 crore.
INH is exiting JMFCS as the fund’s life is getting over, sources said. It first bought into JMFCS in fiscal 2015 and later acquired more shares in 2017 and then again in 2018, investing a total of Rs 950 crore in the NBFC. JMFCS marked Pandit’s first investment in India’s financial services sector. Pandit also holds 1.2% in the listed JM Financial. The deal valuation of Rs 3,000 crore is lower than JMFCS’ net worth of Rs 4,200 crore. This is because there has been under-recoveries in real estate financing and the same hasn’t been provided in the books. The under-recoveries are a result of stress on developers, said sources.
Separately, JMFCS will buy 72% in an asset reconstruction company from JM Financial for Rs 856 crore. The move will increase JMFCS’ stake in JMFARC to 82% from 10%.
The balance 18% is held by Ambuja Cements founder Narotam Sekhsaria (9%), Valiant Mauritius Partners and Indian Overseas Bank. The step is being taken as JM Financial Asset Reconstruction (JMFARC) needs funding on a regular basis as it has been under stress because of certain investments. Moreover, JMFCS, with a cash reserve of Rs 1,300 crore, is in a much better position to support JMFARC.