After the transaction, JMFL’s stake in JMFCSL will increase from 46.68% to 89.67%.
The board has spent around Rs. 856 crore by JMFCSL to acquire 71.79% stake in JM Financial Asset Reconstruction Company (JMFARC), a company release said.
After the transaction, JMFCSL’s stake in JMFARC will increase from 9.98% to 81.77%. As a result of the proposed transaction, JMFL will receive approximately Rs. 426 crore will be a net cash outflow and will be funded from surplus cash.
The proposed transaction will be subject to applicable regulatory, shareholder and other approvals and is expected to be completed in 3-6 months, the release said.
The company cited the consolidation of its distressed credit business under its wholesale debt syndication platform – JMFCSL – as the strategic rationale behind the decision.
“The platform will leverage the experience of its talent pool through various economic cycles to achieve higher risk adjusted returns,” a company statement said.
“Over the past 15 years, JM Financial Group has developed significant expertise and relationships in both the wholesale and distressed credit businesses. This expertise will be leveraged across balance sheet business models to diversified originators to distribute/syndication models across asset classes,” the release further said.
The group’s share of consolidated profits will increase accordingly and JMFL will have increased control over JMFCSL, including capital allocation and distribution of profits, the release said.
After consolidation of shareholding, JMFL’s investment will be mainly towards expansion of both its retail capital market led business and retail home financing business.
Commenting on the development, Vishal Kampani, Non-Executive Vice-Chairman, JM Financial said, “The proposed transaction will align our corporate and capital structure providing greater flexibility to our shareholders to optimize capital allocation and profit distribution. We expect significant long-term growth.” Opportunities are emerging for our businesses and are well positioned to take advantage of the evolving market environment.”
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