True North to pick up 26% stake in Federal Bank’s NBFC
Photo Credit: Shah Junaid/VCCircle

Homegrown private equity firm True North is set to acquire 26% stake in Fedbank Financial Services Ltd (Fedfina), a non-banking financial company (NBFC) of Kerala-based private sector lender Federal Bank. The acquisition will take place through the purchase of fresh shares.

The value of the deal was not disclosed. After the transaction, Federal Bank’s stake in wholly-owned subsidiary Fedfina will come down to 74%. The deal will be subject to statutory and regulatory approvals.

The investment will help Fedfina augment its capital base, primarily to support its growing asset business, and boost its branch network, Federal Bank said. The infusion will also strengthen its capital adequacy and diversify its funding sources.

“Fedfina has successfully built out its assets business of more than $200 million and intends to continue driving its next phase of growth by increasing its product offerings and exploring cross-selling to its current and potential customers,” said Divya Sehgal, partner at True North. Sehgal said the investment in Fedfina showed True North’s renewed strategy of sector-focused investment.

Fedfina received NBFC licence from the Reserve Bank of India in 2010. It offers multiple loan products, which include property loans, structured finance and gold loans. It also distributes loan products of the Federal Bank.

According to a report by credit rating agency Crisil, Fedfina has 123 branches, mainly in Karnataka, Andhra Pradesh, Telangana and Tamil Nadu. It had a loan portfolio of Rs 1,363 crore as on 31 December 2017.

As on 31 March 2017, the total loan portfolio of Fedfina was Rs 962 crore, and as on 31 March 2016, it was Rs 611 crore, according to Federal Bank’s annual report.

Meanwhile, in a separate filing, Federal Bank said it had received the central bank’s approval for acquiring up to 19.9% stake in investment bank Equirus Capital Pvt. Ltd.

In February, Federal Bank had said it would acquire 26% stake in Equirus Capital for an undisclosed amount, in order to diversify beyond traditional banking and create additional streams of revenue.

True North

Last December, VCCircle reported that True North is said to have marked first close of its sixth fund at $425-450 million.

True North, which was established in 1999 with a focus on investing in mid-sized profitable businesses, has previously raised $2 billion across five funds to invest in various sectors, especially in the categories of financial services, consumer, healthcare and technology products and services.

True North has struck some deals in the financial services space.

In April 2017, a True North-led consortium agreed to buy Religare Health Insurance Company.

In February 2017, True North agreed to invest about $100 million (Rs 667 crore) in mortgage lender Home First Finance Company India.

True North is a promoter of Infinity Fincorp Solutions, which focuses on commodity financing.

The other True North investee companies in financial services space include Magma Fincorp and Fincare Business Services.

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