Following the transaction, JMFL’s stake in JMFCSL will increase from 46.68% to 89.67%.
The board also approved JMFCSL’s acquisition of 71.79% stake in JM Financial Asset Reconstruction Company Ltd (JMFARC) from JMFL for a consideration of approximately Rs 8,560 crore, according to a company statement.
Post the transaction, JMFCSL’s stake in JMFARC will increase from 9.98% to 81.77%.The proposed transaction will result in a net cash outflow of about Rs 4,260 crore from JMFL, which will be funded from surplus cash.
The proposed transaction is subject to relevant regulatory, shareholder and other approvals and is expected to close in three to six months, the announcement said. The company cited consolidating its non-performing loan business under its wholesale debt syndication platform, JMFCSL, as the strategic rationale behind the decision. “The platform will leverage the talent pool’s experience through various economic cycles to achieve higher risk-adjusted returns,” the company’s statement said. “Over the last 15 years, JM Financial Group has built significant expertise and relationships in both wholesale and non-performing loan businesses. This expertise will be channelled towards transforming the business model from an on-balance sheet business model to a diversified originate-to-distribute/syndicate model across asset classes,” the announcement further said.
According to the announcement, the group’s share of consolidated profits will increase accordingly and JMFL will have greater control over JMFCSL, including capital allocation and profit sharing.
Following the equity combination, JMFL’s investments will be primarily directed towards expanding both its retail capital markets driven business and its retail residential lending business.
Commenting on the development, Vishal Kampani, Non-Executive Vice Chairman, JM Financial said, “The proposed transaction will align our corporate and capital structure and provide us with greater flexibility to optimise capital allocation and profit distribution to shareholders. We foresee significant long-term growth opportunities for the business and are well positioned to capitalise on the evolving market scenario.”
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