US-based The Capital Group buys 2.08% stake in IIFL Finance; CDC Group exits partially, BFSI News, ET BFSI

The Capital Group, which manages over $2 trillion worth of assets across the world bought 2.08% into Nirmal Jain-promoted non-banking finance company (NBFC) – IIFL Finance at Rs 190 crores on Wednesday, according to market sources.

The transaction was executed in a block deal on Wednesday in which existing investor CDC Group, which has been invested in IIFL Finance since last 6 years sold part of its investments. CDC Group sold 14 million shares which were bought by The Capital Group and Sunil Singhania’s Abakkus Emerging Opportunities Fund, said sources.

Before the transaction, CDC Group, which is the private equity arm of UK Government-owned 15.5% stake in IIFL Finance.

The Capital Group has bought the stake in IIFL Finance through Capital Small Cap World Fund Inc., which has earlier invested Havells India, L&T Finance, CAMS, PI Industries, Bharat Financial, Gland Pharma, Tanla Platforms, Gland Pharma, Laurus Labs, and Coforge among others.

Abakkus Emerging Opportunities Fund also bought 27 million shares of IIFL Finance on Wednesday at Rs 240 apiece.

Shares of IIFL Finance locked in 5% upper circuit at Rs 252.20 on Wednesday.

IIFL Finance, which is a part of IIFL Group founded by Nirmal Jain in 1995 is backed by Canadian investor Prem Watsa. Fairfax, Watsa’s firm has a 29.9% stake in IIFL Finance. Other foreign investors have a 10.9% stake in the company.

IIFL Finance shares have risen from lows of Rs 65 a year ago to a high of Rs 347 on March 16, 2021, helped by its retail-oriented business strategy and exit from wholesale real estate business which reduces non-performing assets significantly. The company is in the process of has transferred its real estate assets to Ares SSG Capital Management through an Alternate Investment Fund (AIF) structure. The AIF has a size of Rs 36,00 crore.

During the financial year ending March 2021, the company saw its net profit rising to a record Rs 1,000 crore, a 39% growth despite a pandemic year was primarily driven by its retail-focused gold loan and affordable home loan portfolios.