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JM Financial Home Loans, a subsidiary of the JM Financial Group, has initiated discussions with IndoStar Capital Finance regarding a possible merger of the latter's home finance business. The companies are discussing potential strategic options, including the possibility of combining and listing the retail mortgage portfolio of JM Financial and IndoStar Home Finance, as well as other mortgage-backed businesses of IndoStar. According to sources familiar with the matter, the discussions are non-binding and depend on due diligence and negotiation of commercial terms.
Both JM Financial Home Loans and IndoStar Home Finance are focused on the affordable housing market. JM Financial Home Loans has assets under management worth ?1,272 crore as of December 2022, and operates through 78 branches in nine states in the west and south. The company's average loan size is ?12 lakh, and loan-to-value is 55% as of December 2022. IndoStar Home Finance, a wholly owned subsidiary of IndoStar Capital Finance, has an AUM of ?1,526 crore at the end of December 2022.
In its regulatory filing to stock exchanges, JM Financial stated that it has a "long-term strategic interest in the home loan and such mortgage-backed businesses and looks forward to scaling these businesses to the next phase of its growth." A potential merger with IndoStar Home Finance would enable JM Financial to expand its presence in the affordable housing market and enhance its capabilities in mortgage-backed businesses.
The affordable housing market has been gaining momentum in India due to the government's push to provide housing for all. The sector has witnessed increased demand in recent years, particularly during the pandemic, as people's preferences shifted towards larger homes with better amenities. According to a report by Knight Frank India, the affordable housing segment has seen a 27% rise in the number of units launched in 2021 compared to the previous year.
The potential merger between JM Financial Home Loans and IndoStar Home Finance could have a significant impact on the affordable housing market in India. It could create a larger entity with greater resources and capabilities to cater to the needs of the growing affordable housing segment. The combined entity could also benefit from synergies in operations, distribution, and technology, enabling it to provide more efficient and effective services to customers.
In conclusion, the discussions between JM Financial Home Loans and IndoStar Capital Finance regarding a possible merger of their home finance businesses are a positive development for the affordable housing market in India. The sector has been witnessing strong growth, and the potential merger could further boost its momentum by creating a larger, more capable entity with a greater ability to meet the growing demand for affordable housing. The success of the merger would depend on several factors, including due diligence, negotiation of commercial terms, and regulatory approvals, but if it goes through, it could be a game-changer for the affordable housing market in India.
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