IHC Affiliate Avenir Seals Rs 8,850 Crore Sammaan Capital Acquisition

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AuthorRiya Kapoor|Published at:
IHC Affiliate Avenir Seals Rs 8,850 Crore Sammaan Capital Acquisition
Overview

Avenir Investment RSC Ltd., backed by International Holding Company (IHC), has finalized its Rs 8,850 crore acquisition of Sammaan Capital Ltd. after receiving necessary regulatory approvals from SEBI and RBI. The Reserve Bank of India has set specific operational conditions for the deal. The capital infusion aims to strengthen Sammaan Capital's finances. However, challenges remain due to its past as Indiabulls Housing Finance and current negative profitability.

Foreign Capital Boost

Final regulatory approvals have paved the way for Avenir Investment RSC Ltd. to acquire a controlling stake in Sammaan Capital Ltd. This Rs 8,850 crore deal marks a major foreign capital injection into India's non-banking financial company (NBFC) sector, reshaping Sammaan Capital's ownership and injecting new momentum as it seeks a fresh identity after past reputational issues.

IHC's Investment

Avenir Investment RSC Ltd., linked to Abu Dhabi's International Holding Company (IHC), secured final approvals from India's SEBI and RBI for its significant investment. The Rs 8,850 crore capital will be injected via a preferential issue, giving Avenir an initial 41.23% stake, potentially rising to 63.36% after an open offer. This investment reflects a larger trend of foreign capital flowing into India's financial services, with global firms seeing the country as a high-growth market. The deal is one of the largest foreign investments in India's NBFC sector recently.

Company Valuation

Sammaan Capital trades at a P/E of roughly 9.5x to 10.5x. This is lower than the average Indian NBFC P/E of 19-21. For comparison, LIC Housing Finance trades at about 4.98x, and PNB Housing Finance at 9.58x. Sammaan Capital's lower valuation likely reflects ongoing concerns about its past performance and the main aim of the new capital: to improve its financial health. The company currently has a negative Return on Equity (ROE) of -8.66%, showing profitability issues even with the capital injection.

New Strategy, RBI Rules

The deal marks a new era for Sammaan Capital, previously Indiabulls Housing Finance. It rebranded in July 2024 to focus on affordable housing and MSME credit. IHC's capital injection is expected to boost lending and expansion. However, the RBI has imposed key conditions: Sammaan Capital cannot raise public deposits, and the share transfer must finalize within a year. If Avenir's ownership drops below 26% later, RBI approval for further stake increases will be required. These conditions show regulators are proceeding cautiously due to the company's past operational record.

Past Issues and Risks

Sammaan Capital faces significant challenges from its past as Indiabulls Housing Finance. The former entity faced allegations of financial irregularities, including fund misuse and complex dealings. The Enforcement Directorate (ED) has noted serious issues, and NGOs have raised corporate governance concerns, which some allege the Ministry of Corporate Affairs overlooked. Combined with its negative ROE and weak technical signals, this history fuels investor caution. Credit rating agencies CRISIL and S&P Global Ratings have put its long-term debt on a 'Rating Watch with Developing Implications,' indicating ongoing review. The success of the new capital will depend on addressing these past problems and current profitability hurdles.

Looking Ahead

Now that major regulatory approvals are secured, attention turns to completing the transaction and how Sammaan Capital will use the new funds. The significant foreign investment offers potential for growth. However, the RBI's strict conditions and the company's past issues pose considerable operational and reputational obstacles. Investors will watch Sammaan Capital's financial results closely to see if the capital boost and strategic changes can lead to stable profits and distance it from its history.

Disclaimer:This content is for informational purposes only and does not constitute financial or investment advice. Readers should consult a SEBI-registered advisor before making decisions. Investments are subject to market risks, and past performance does not guarantee future results. The publisher and authors are not liable for any losses. Accuracy and completeness are not guaranteed, and views expressed may not reflect the publication’s editorial stance.