JM Financial to strengthen its stake in wholesale loan syndication and ARC businesses

JM Financial Limited (JMFL) has decided to consolidate its stake in the wholesale loan syndication business (JM Financial Credit Solutions Limited/JMFCSL) and distressed credit business (JM Financial Asset Reconstruction Company Limited/JMFARC) under one platform.

Under the consolidation exercise, JMFL will increase its stake in JMFCSL to 89.67 per cent by acquiring 42.99 per cent stake for a consideration of approximately ₹1,282 crore.

Additionally, JMFCSL will increase its stake in JMFARC to 81.77 per cent by acquiring 71.79 per cent stake from JMFL for approximately ₹856 crore.

“The proposed transaction will result in a net cash outflow of approximately ₹426 crore from JMFL and will be funded from surplus cash,” JMFL said in a regulatory filing.

This is subject to applicable regulatory, shareholder and other approvals and is expected to be completed in 3-6 months

“Over the past 15 years, JM Financial Group has developed significant expertise and relationships in both the wholesale and distressed credit businesses,” the company said.

“This expertise will be channelized to drive a shift from balance sheet business models to distribution/syndication models across asset classes towards a diversified origination.”

• Also read: HAL, BEL, Cochin Shipyard, Mazagon Dock, GRSE, MIDHANI: Evaluating Goliaths compared to global competitors

“Once JM Financial Group’s ownership in JMFCSL increases to 89.67 per cent, the group’s share in the consolidated profits will increase accordingly. Additionally, JMFL will have enhanced control over JMFCSL, including capital allocation and distribution of profits,” the company said.

The consolidation move comes in the backdrop of recent action by RBI against JM Financial Products (JMFPL) and SEBI against JMFFL.

In March 2024, RBI directed JMFPL to cease and desist with immediate effect any form of financing against shares and debentures, including initial public offering (IPO) of shares as well as loans against subscription of debentures. Approval and distribution was also included.

In June 2024, SEBI passed an order directing JMFL not to take any new mandate as lead manager to public issues of debt securities till March 31, 2025.

JMFL is an operating-cum-holding company, engaged in various financial services businesses on its own and through its subsidiaries and associate companies.

The company holds investments in its subsidiaries engaged in businesses such as non-banking financial services, asset reconstruction, equity research, equity broking for institutional and non-institutional investors, wealth management advisory and mutual funds.

JMFCSL. An NBFC, primarily engaged in funding real estate developers at various stages in the life cycle of a real estate project.

• Also read: IPO story in the first half of 2024