Canadian company Fairfax Financial is preparing to offload its residual interest of roughly 11% in Indian non-bank lender IIFL Finance, according to Reuters.
Proceeds from the prospective divestment are earmarked to help finance Fairfax’s acquisition of a 60% controlling interest in IDBI Bank, a transaction priced at 528.78bn ($5.56bn).
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The state-backed lender is being sold by the Indian federal government alongside the country’s largest insurer.
According to an individual familiar with the matter, Fairfax aims to finalise its departure from IIFL Finance “soon” to cover a portion of the purchase consideration.
Based on prevailing share valuations, the Canadian entity’s 11% holding carries a market value of approximately Rs30bn ($320m), said the news agency.
The stake will probably be offloaded via secondary markets, as IIFL Finance’s controlling shareholders do not plan to purchase the equity, the source stated.
Fairfax originally secured a holding of nearly 22% in the non-bank lender in 2015.
That position halved to 11% as IIFL Finance enlarged its equity capital.
Alongside its non-bank lending exposure, Fairfax maintains a 38% holding in IIFL Capital Services, the group entity handling wealth management and investment banking operations.
The Canadian parent disclosed that it is currently executing an open offer to expand this position to 51%.
Should this open offer, slated to conclude shortly, fail to secure the targeted majority, IIFL Capital’s controlling shareholders have agreed to trim their own holdings, the first source noted.
The controlling shareholder base is identical across both IIFL Capital and IIFL Finance.
Fairfax outlined last month it ultimately intends to consolidate both its holding in IIFL Capital and its exposure in insurance firm Digit under IDBI Bank.
Recently, the board of Indian non-banking lender IIFL Finance cleared a primary capital infusion totalling Rs64.14bn ($686m) via a preferential issue.
Private equity funds managed by Blackstone will provide the bulk of the financing, committing Rs50bn ($535m) through a preferential allotment of compulsorily convertible preference shares (‘CCPS’).
Alongside the institutional investment, company promoters Nirmal Jain and R. Venkataraman are contributing Rs12.6bn ($135m) via a preferential allotment of warrants.
