The Indian real estate mortgage lending industry has been heating up in India for more than a year amid allegations of fraudulent transactions and fund diversion. In a new development, funds controlled by Blackstone have decided to buy a 70% stake in Indian mortgage lender Aadhar Housing Finance Limited, according to a statement by the firm’s parent company Wadhawan Global Capital.
Another unit of Wadawan Global, Dewan Housing Finance Corporation, which held a 9.2% stake in Aadhar has decided to liquidate its holding as well. Dewan’s stake will also be sold to Blackstone. Wadhawan Global Capital has suffered from a weak balance sheet and chronic debt levels over the recent past. According to the chairman of the firm, Kapil Wadhawan, this stake sale is a part of the restructuring process. He said, “The transaction with Blackstone is a part of our multi-pronged strategy to reduce the corporate debt levels and strengthen our balance sheet.”
According to sources who are close to the deal, Blackstone bought the stake in Aadhar for a total of $379 million. In addition to that, it has emerged that the World Bank’s investment vehicle International Finance Corp also owns a 17% stake in Aadhar. Kapil Wadhawan said, “Blackstone emerged as the winner for the affordable housing finance arm of Wadhawan’s Dewan Housing bidding the business at Rs 2,700 crore, which is three times the book.”
However, what needs to be understood with regards to this sake sale is that Wadhawan Global’s decision to Aadhar is directly linked to the troubles related to its unit Dewan Housing Finance Corporation. According to a report published in an Indian news website Cobrapost, it has been alleged that Dewan has been involved in rampant corruption and has diverted vast sums of money to shell companies. The report stated that Dewan diverted a total of loans worth $4.35 billion and following the publication of the report, the stock price tanked. The shares almost went down by 50% since Tuesday, and it came under further strife after it was reported that the Ministry of Corporate Affairs in India was considering initiating an investigation into the whole affair.
Due to these troubles, Blackstone has been able to get their hands on a business that is thriving, and it could well prove to be a masterstroke in the years to come. However, considering the problems at Dewan, many might have refused to do business.
