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Morgan Stanley PE bets on Centrum Housing Finance
Photo Credit: Reuters

Centrum Housing Finance Ltd (CHFL), the affordable housing-focussed arm of the diversified Centrum Group, has raised Rs 190 crore (approximately $26.54 million at current exchange rates) from a fund managed by Morgan Stanley Private Equity Asia.

The Morgan Stanley PE fund will be the first external institutional investor in Centrum Housing and will acquire a significant minority stake in the firm following its investment.

The company will use the capital to expand its operations and enter new markets, Centrum Housing said in a statement.

Global professional services firm EY acted as the exclusive investment banking advisor to the transaction.

Sanjay Shukla, MD and CEO at Centrum Housing, said the investment by Morgan Stanley's arm was validation of the housing finance provider’s business model. The company will continue to focus on growing in the low- to middle-income segments in Tier-II and Tier-III cities, he said.

“We believe Centrum Housing is well-placed in this segment given its strong retail focus, robust underwriting and collection mechanism, and disciplined ALM (asset and liability) management,” Morgan Stanley Private Equity Asia in India co-head Arjun Saigal added.

Centrum Housing, which started operations in 2017, says it currently has 36 branches across six states in the country, namely Gujarat, Madhya Pradesh, Rajasthan, Maharashtra, Chhattisgarh, and Delhi. It primarily offers financing to individuals looking to buy or build houses in the affordable segment.

The firm is part of the larger Centrum Group, which was founded in 1997. The Group operates diversified businesses including investment banking, institutional broking unit, wealth management services, and alternative investment management businesses.

Centrum Housing is promoted by Centrum Capital Ltd. shares of which were trading 0.44% up at Rs 22.90 apiece at the time of writing this report.

Morgan Stanley PE Asia

The investment in Centrum Housing represents the fourth investment in India’s retail lending space by a fund managed by Morgan Stanley Private Equity Asia. According to reports last month, it had emerged as the frontrunner for the investment along with a couple of other PE funds, including the New York Life-backed Jacob Ballas.

Morgan Stanley is expected to invest in Centrum Housing from its fifth Asia fund, which in September last year raised $366.4 million, according to regulatory findings. At the time, media reports had suggested that the American multinational investment bank could secure as much as $2 billion for the vehicle.

In India, Morgan Stanley usually focusses on minority investments in sectors such as consumer products, industrial products, financial services, healthcare, telecommunications, and technology.

In the financial services space, it invested in Jaipur-based Kogta Financial (India) Ltd in November 2018. Before that, it had invested in lenders Janalakshmi Financial Services (now Jana Small Finance Bank) and Five Star Business Finance.

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