India: Federal Bank to sell 26% stake in NBFC unit to True North

Photo: Livemint

The board of Federal Bank Ltd has approved a 26% strategic investment by homegrown private equity player True North in its subsidiary, FedBank Financial Services Ltd (FedFina), the private sector lender said in a statement on Friday.

The transaction is subject to statutory and regulatory approvals. Federal Bank did not disclose the financial details of the transaction.

On 23 April, Mint reported that True North was in advanced talks to buy the 26% stake in FedFina for Rs400 crore. ICICI Securities is advising Federal Bank on the Fedfina stake sale, and the transaction is likely to conclude within a few weeks.

The investment will help FedFina augment its capital base primarily to support its growing asset business and to grow its branch network, the statement said. It will help further improve the company’s financial fundamentals by strengthening its capital adequacy and diversifying its funding sources.

“We consider this investment by True North an endorsement of the business outlook and capabilities of FedFina. This transaction and the expertise that True North carries with it will turn out to be seminal in the growth and expansion of FedFina,” said Shyam Srinivasan, managing director and chief executive of Federal Bank.

ICICI Securities Ltd was the exclusive financial advisor to the transaction.

“It (FedFina) has successfully built out its AUM (assets under management) of more than $200 million and intends to continue driving its next phase of growth by increasing its product offering and exploring cross selling to its current and potential customers. The company’s track-record and explosive growth is a testament to the FedFina’s leadership team. Our investment in FedFina is a reiteration of our renewed sector focused investment strategy,” said Divya Sehgal, partner at True North.

This article was first published by livemint.com