Baring PE Asia emerges as sole bidder for Can Fin Homes, again

In September, CEO R A Sankara Narayanan said the bank had received 12 EoIs and was expecting Rs 1,000 crore for its entire stake. JM Financial and Kotak Mahindra are advising the lenders in the sale process. Can Fin Homes has a market cap of Rs 5,...

MUMBAI: In an exact rerun of last year’s developments, Baring PE Asia has emerged as the sole bidder to acquire a controlling stake in Can Fin Homes, the housing finance subsidiary of state-run Canara Bank. Two other contenders, Aditya Birla Capital and Warburg Pincus, pulled out just ahead of the deadline on Thursday.

In June this year, the bank received board approval to revive plans to sell part or its entire 29.99% in the listed housing finance company.

In 2018, Canara Bank called off the sale process after receiving price bids below expectations. Then too, Baring was the sole bidder after HDFC’s competing stock offer was rejected.


In September, chief executive R A Sankara Narayanan said the bank had received 12 expressions of interest (EoIs) and was expecting Rs 1,000 crore for its entire stake. JM Financial and Kotak Mahindra are advising the lenders in the sale process.

Can Fin Homes has a market cap of Rs 5,440 crore. At current price, a 30% stake would have fetched Rs 1,632 crore. Details of Baring’s bid could not be independently ascertained.

Baring, Warburg and Aditya Birla Capital spokespersons declined to comment.
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It is not clear what the Canara Bank board would decide now. Clarity is expected to emerge in the next 24-36 hours, said a person involved on condition of anonymity as the talks are in private domain.

“We will proceed as per the terms of the RFP. The best bidder will be shortlisted but no decision has been taken yet. I cannot speculate beyond that,” Narayanan told ET without getting into specifics.

Singapore’s sovereign wealth fund GIC owns 13.45% stake in Can Fin. Canara Bank, one of the four anchor banks identified by the government, is scheduled to merge with Syndicate Bank. On Wednesday, the bank reported a rise of 14% in its consolidated net profit at Rs 405.49 crore for the second quarter ended September amid fall in bad loans and healthy income from operations.

“The deal would help Canara Bank shore up its core equity capital,” said a source close to the development. “Many large private equity and housing finance companies have stayed away from bidding for the project as they are busy dealing with the credit squeeze in the system.”
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Initially, several funds including Chrys Capital, KKR, Advent had shown interest, but in the end most dropped out except Baring – an Asia-focused buyout fund.

“Given the company’s continued growth traction in the core southern markets and sustained expansion in the non-south markets, we believe it would achieve 19% CAGR over FY19-21E,” said Raj Jha, analyst with Edelweiss.
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Can Fin is perceived as low risk company as it mostly focuses on salaried individuals comprising 71% of its loan book. The average ticket size is Rs 17 lakh for housing loans and Rs 13 lakh for non-housing loans.

The loan book growth has declined to 17% after 2017 from 30-40% between 2011and 2016 due to Real Estate (Regulation and Development) Act and demonetisation. Its loans outstanding were Rs 19,600 crore at the end of September 2019.

However, analysts feel the segment already has wafer-thin spreads and in an environment of uncertainty, any further asset side risks would further impact margins. “Outside of Canara Bank there would have been a ratings downgrade and that in turn would have impacted its cost of borrowing. When cost of risks are already elevated, nobody knows what headroom a lender in the business can have,” said an executive from a rival fund that evaluated the prospect but eventually opted out.
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