Religare buys part of Citi's home loan biz for Rs 500 cr

15-Jul-2010

Financial services firm Religare Enterprises has agreed to buy a part of Citigroup's home loan portfolio in India for nearly Rs 500 crore, snapping up a key asset that promises to amplify its presence in the consumer lending business. The 26-year-old-company, owned by billionaire brothers Malvinder and Shivinder Singh, carried out the cash transaction through non-banking finance offshoot Religare Finvest. REL has interests in asset management, life insurance, wealth management, equity and investment banking, but has so far shied away from consumer finance, though Religare Finvest does lend to small businessmen against property. The Citi deal changes that.

"The demographics of the Citi's home equity customers perfectly suited us in terms of their assets, locations and profile," Religare Finvest CEO Kavi Arora told ET, adding the transaction is expected to be completed by September. Four-year-old Religare Finvest is present across 23 cities and employs more than 400 people. A Citibank executive described the transaction as routine and a small portfolio sale. "Such assets sold are substituted by fresh originations (loans)," he said.

Citigroup's home loan business, including the home financing and mortgage division, is valued at around Rs 9,000 crore. The deal helps Religare lay hands on about 1,700 contracts and assets under management worth Rs 500 crore, said Mr Arora. Religare Finvest provides mortgage finance to small businesses, equipment companies and infrastructure firms at annual interest rates of up to 12.5%.

Citi's home biz buy REL's fifth

It also provides IPO financing to companies. The deal will vault the value of its assets to Rs 3,300 crore from Rs 2,800 crore. The deal is part of an ongoing growth drive by REL through buyouts that includes a strategic investment plan worth Rs 4,600 crore globally. It marks the company's fifth acquisition in three years. REL bought London-based stockbroking firm Hichens Harrison for $110 million in 2008 and acquired Lotus India AMC to expand its presence in the asset management space.

Early this year, the company purchased venture capital and private equity investment firm Northgate Capital for about $200 million. Its investment banking arm Religare Capital acquired investment banking firm Aviate Global (Asia), which has offices in Hong Kong, Singapore and Melbourne, earlier this month. REL shares declined 2.59% to close at Rs 409.90 on the Bombay Stock Exchange on Wednesday. REL has been a key business for the Singh brothers who sold their 35% stake in drugmaker Ranbaxy to Japanese pharma company Daiichi Sankyo for Rs 10,000 crore two years ago. The other main company Fortis Healthcare is locked in a battle for control of Singapore hospital chain Parkway Holdings against Malaysia's Khazanah.

Source : www.insuremagic.com