Capital India Finance makes bold move, sells housing arm for a staggering Rs 26,700 lakhs

In a strategic move aimed at refocusing its core business, Capital India Finance Limited (CIFL) has announced the sale of its housing finance subsidiary, Capital India Home Loans Limited (CIHL), for a total of INR 26,700 lakhs. The sale, approved during a board meeting held on October 16, 2024, transfers CIFL’s entire equity stake in CIHL to Weaver Services Private Limited, a company backed by prominent investors. The transaction, however, is still pending regulatory approval.

A Strategic Re-alignment for Capital India Finance Limited

CIFL, a Systemically Important Non-Deposit-Taking NBFC (NBFC-ND-SI) with a focus on micro, small, and medium enterprises (MSMEs), has undertaken this strategic sale to strengthen its balance sheet and deepen its focus on core businesses. Over the last three years, CIFL has seen a consistent growth rate of 27.70% CAGR, and this move is expected to further propel its expansion efforts. The company aims to reallocate the capital from the sale to boost its lending and forex services business, enhancing overall operational efficiency and reducing market risk exposure.

Expert Opinions Highlight the Growth Potential

Keshav Porwal, Managing Director of CIFL, expressed pride in the company’s achievements, emphasizing the importance of focusing on core business areas to align with the evolving economic landscape of India. He highlighted that while CIHL had developed strong customer-centric home loan products, CIFL now sees more potential in concentrating on its primary competencies.

Chief Executive Officer Pinank Jayant Shah also weighed in, stating that the sale is a testament to CIFL’s capability in building scalable retail lending businesses. He remarked that the capital liberated from this transaction would enable CIFL to enhance its equity base and strengthen its operating metrics. Shah added that the sale supports CIFL’s vision of becoming the preferred partner for MSMEs in India, aligning with the company’s strategy for greater value creation.

Meanwhile, Ravi Virwani, CEO of CIHL, remains optimistic about the subsidiary’s future. He stated that the affordable housing finance market in India is poised for significant growth, and CIHL, as a new-age player, is well-positioned to capitalise on this potential. He mentioned that CIHL’s focus on innovative and customer-centric solutions, supported by advanced technology and analytics, would continue as it enters its next growth phase.

Future Implications for Capital India Finance and CIHL

This strategic divestment reflects CIFL’s long-term vision to refine its business model by concentrating on high-growth and high-margin sectors, such as MSME lending and foreign exchange services. By divesting the affordable housing finance segment, CIFL can better manage its resources and risks associated with this market, thereby positioning itself for sustainable growth.

CIHL, on the other hand, will continue its journey under the ownership of Weaver Services Private Limited, maintaining its pan-India presence with 27 branches. The company, which had an asset under management (AUM) of INR 45,130 lakhs and a net worth of INR 14,526.37 lakhs as of March 31, 2024, is expected to leverage new investment for further expansion and product diversification.