IndoStar Capital Finance is considering selling part of its stake in a home loan subsidiary to raise funds to address concerns about the private equity-backed firm’s ability to continue as a going concern.
The company, in which private equity players Brookfield, Everstone and others have a majority stake, said in a BSE filing that its monetization plan for lndoStar Home Finance Private is subject to board approval.
The housing finance unit reported a 253% year-on-year rise in net profit to Rs 16 crore in the first quarter ended June 2022. Its assets under management grew 45% year-on-year to 1,467 crore during the same quarter. .
IndoStar Capital incurred losses due to the coronavirus pandemic, which led to defaults on its loan portfolio and created uncertainty about its existence as a going concern. It had reported a consolidated loss of Rs 736 crore in FY 2021-22 and Rs 214 crore in FY 2020-21. It posted a net profit of Rs 61 crore for the quarter ended June 2022 (Q1FY23).
On June 30, 2022, IndoStar Capital crossed the specified threshold for gross non-performing asset (GNPA) and/or net NPA ratios for certain loan agreements. Its gross NPA stood at 8.2% and net NPAs at 3.6% at end-June 2022.
IndoStar Capital said some lenders have the option to terminate, reduce, suspend or cancel the facility. However, management expects that lenders may raise interest rates until the GNPA/NNPA ratio crosses the thresholds.
The company said it has a history of accessing diversified funding sources, but the success of its plans cannot be guaranteed.
After the June quarter, IndoStar Capital has raised an incremental funding of Rs 380 crore from banks and financial institutions. As of June 30, the company met the required capital adequacy ratios and had cash and cash equivalents totaling Rs 255.07 crore.
In May 2022, the company announced that it had detected declines as a deviation from loan sanctioning and impairment control policies in the commercial vehicle (CV) loan portfolio. The CV and SME loan portfolio review is expected to be completed by September 2022.
