Mumbai: Indiabulls Housing Finance will strike a ₹5,000 crore deal with global investor Oaktree Capital to acquire a portion of loans provided by the non-banking finance company to sustain several developers.
The infusion of debt capital will happen through a jointly-formed special purpose vehicle (SPV) which would issue instruments like debentures that Indiabulls and Oaktree would subscribe to.
The SPV has already been set up and the fund infusion is anticipated over the next few weeks, said persons aware of the plan.
Oaktree Capital will be infusing ₹3,000 crores in this joint entity, while Indiabulls real estate Finance will invest ₹2,000 crores.
“Oaktree Capital will hold a 60% stake in this newly constituted entity, while the balance will be with Indiabulls Housing Finance following their capital commitment,” said one of the persons mentioned above. “Loans that would be acquired, along with underlying mortgaged properties, are not strained loans and the underlying terms of the loans would remain unaltered,” he said.
The joint entity, through this transaction, will acquire these loans extended to developers by Indiabulls Housing Finance thereby providing an immediate exit and liquidity to the NBFC.
These loans are expected to be repaid by the developers over time, depending on the conclusion of the project and at the end of the sales cycle. The SPV will then repay the debentures as and when the recovery takes place.
It is anticipated that Indiabulls Housing Finance may consider the agreement with Oaktree as a paradigm for future transactions. Another ₹2,700 crore transaction is in the pipeline.
In the last few years, some of the finance companies had forged more complex agreements by establishing alternative investment funds with foreign investors where the latter had the first claim on recovery. The money collected into the AIFs was used to finance builders who were exhibiting early symptoms of stress, while the developers issuing debentures to the AIF used the debt capital to repay the finance company.
Unlike in the present arrangement, in such transactions, the foreign investors held senior notes and were the first to receive money that the fund distributed. However, such senior-junior transactions have now ceased after some of the banks and realty funds drew the attention of the capital market regulator.
Currently, Indiabulls Housing Finance’s loan book size is around ₹74,000 crore.
Before this, in June 2020, Indiabulls Housing Finance had raised over ₹2,000 crores from Oaktree Capital Group by pledging a part of its loans extended to realty developers.
Under the transaction in 2020, Oaktree Capital acquired non-convertible debentures sold by Indiabulls Housing Finance. The debentures were guaranteed by an underlying real estate portfolio valued at roughly ₹4,500 crores.
The Bombay Stock Exchange and the National Stock Exchange have recently approved the reclassification of promoter Sameer Gehlaut and his trusts to the category of public shareholders. He resigned from the company’s non-executive director post in March 2022.
Gehlaut and his trusts, with a 9.66% holding in Indiabulls Housing, had made an application in April 2022 for the reclassification to the public shareholder category.
