Vikram Pandit’s fund picks 50% stake in JM Financial’s realty lending arm for $87M

A fund managed by former chief of banking giant Citigroup, Vikram Pandit, along with former Old Lane Hedge Fund partner Hari Aiyar (former chairman and CEO of Old Lane India), has picked up an effective 50 per cent stake in the real estate lending arm of JM Financial for Rs 525 crore ($85 million). In a parallel transaction Aiyar's wife has put in Rs 14.77 crore ($2.5 million).

Bulk of the transaction is through compulsorily convertible preference shares, it said on Friday.

The investment is into FICS Consultancy Services Ltd, the lending arm of JM Financial. With JM Financial committing additional capital of Rs 360 crore, the total commitment of FICS stands at Rs 900 crore.

With this, Pandit has joined the board of directors of the company as non-executive director and Vishal Kampani and Hari Aiyar have joined the board as non-executive vice chairmen.

Nimesh Kampani, chairman, JM Financial Group, said, “The investment in the group underscores Pandit's belief in the group's ability to identify growth opportunities and create significant value for its stakeholders through its product offering.”

In May last year, JM Financial had announced its association with Pandit. This was said to be part of the plan to seek an entry into banking business. Although, JM Financial did not get a licence from RBI last year, it is now taking forward the partnership with Pandit through the NBFC route.

Last year, Vikram Pandit made a big-bang entry into the financial services sector by entering into a wide-ranging deal with ace dealmaker Nimesh Kampani-led JM Financial.

The deal also involved expanding the lending operations of JM Financial and raising capital for the non-banking finance company of the group, as well as setting up a distressed asset fund.

In the first leg of the transaction, Pandit, along with Aiyar, invested in JM Financial through the issue of warrants on a preferential basis. The warrants are due for conversion soon, which would give them just under 1.5 per cent each.

The deal also included plans to expand the lending and financing business of JM Financial by raising $100 million from a pool of capital raised by Pandit. Given the depreciation of Indian currency since then, the dollar value of the deal for the lending business has shrunk in the latest transaction.

The two had also shared plan to form a distressed asset fund with the initial target capitalisation of $100 million.

JM Financial also has an asset reconstruction business.

This is not the first venture between Pandit and Kampani’s JM Financial, though. In August 2006, Pandit’s hedge fund Old Lane Partners, LP, was the lead investor and co-sponsor to JM Financial India Fund, a corporate private equity fund floated by JM Financial.

JM Financial also had a JV till 2007 for investment banking and securities business with Morgan Stanley, where Pandit worked till 2005 – a period of more than two decades.

(Edited by Joby Puthuparampil Johnson)

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