Here is another contender for IDBI Home Finance. Wadhawan group promoted Dewan Housing Finance Corporation (DHFL) is likely to buy out the IDBI Home Finance (IHFL) for Rs 311 crore, according to an ET report.
The report adds that the deal is expected to be announced after the IDBI Bank board has cleared the proposals, which is due to meet on January 22.
IDBI Home Finance has received interest from ten entities till date, including a few private equity funds. Religare Enterprises Ltd and Tata Capital Ltd put in a bid of Rs 211 crore and Rs 225 crore respectively.
Both Religare and Tata have made no secret of their ambition to get into home finance, a high margin business which is likely to see a boost with inflation coming down and cost of fund easing. The reduction in rates is also expected to boost the demand for home loans and see volumes grow.
What makes IDBI Home Finance so tempting is it’s uniqueness of being a subsidiary of a bank with a lower middle income group niche, small enough thereby making it affordable and easily digestible. Also, IDBI Home Finance has a comparatively reduced Net NPA’s on its balance sheet, of about 0.56% as on March 31, 2008.
The company had reported a net profit of Rs 30 crore during 2007-08. It had disbursed Rs 2,710 crore in loans in 2008 and had disbursed Rs 563 crore in loans the previous year.Currently, IHFL employs more than 150 people across 18 locations. IDBI Home Finance had a loan portfolio of Rs 2,700 crore at the end of March 2008, while Dewan Housing Finance's loan book was estimated at around Rs 5,000 crore at the end of September.
IDBI Bank had taken over the erstwhile Tata Home Finance in September 2003 and renamed it IDBI Home Finance. IDBI bank decided to sell the home finance arm as it felt that a separate subsidiary for mortgage lending was not required when the same business was also undertaken by the IDBI bank.
DHFL has an asset base of over Rs 3,580 crore and a network of 72 branches across the country and had reported a 36.57% increase in net profit to Rs 22.07 crore for quarter-ended September 30, 2008. IDBI Home Finance would be a strategic fit for DHFL as both of them focus on lower-middle income group in tier-I and tier-II cities.
Housing loans raised from 27.7% by end-March 1998 to 54-55% at end-March 2008.
There has been an increased activity in the home financing segment, lately.Last year, global private equity firm — the Carlyle group — invested $28 million in Chennai-based Repco Home Finance, a subsidiary of Repatriates Co-operative Finance and Development Bank.
This was followed by French banking group BNP Paribas, acquiring close to 50% stake in Sundaram Home Finance for Rs 196.98 crore. Similarly, AIG Capital bought 75% in Chennai’s Vivek Hire Purchase. Barclays and Societe Generale bought into Chennai’s Rank Investments and Apeejay Finance, respectively.