Blackstone commits about 50 billion rupees for a 15.57% slice of IIFL Finance

Deal snapshot

Blackstone is expanding its footprint in India with a planned 15.57% stake in IIFL Finance for about 50 billion rupees, or $532 million. The investment will be channeled via Ingot SG Pte. Ltd., which plans to subscribe for roughly 83.1 million preference shares that are compulsorily convertible, priced at 602 rupees each. Every preference share will translate into a single IIFL Finance equity share.

IIFL Finance closed at 627 rupees on Monday, about 4% above Blackstone's subscription price. So far this year, the stock is up about 3%. In September, Bloomberg News said Blackstone was among global firms weighing an investment in IIFL Finance.

Why this capital raise, and who else is writing checks

As part of the same fundraising, founder Nirmal Jain plans to take 15 million warrants valued at 9.03 billion rupees. R. Venkataraman is slated to be allotted 4.5 million warrants valued at 2.71 billion rupees, while the founder-group vehicle Ardent Impex Private Ltd. is set for another 1.5 million warrants priced at 903 million rupees.

In October, Fairfax Financial Holdings Ltd. - which held around 13.6% of IIFL Finance as of the end of September - purchased a 60.72% stake in IDBI Bank Ltd., with the price at 528.78 billion rupees, marking the largest-ever foreign investment in India's financial-services sector. Foreign interest is broader too. Abu Dhabi's International Holding Co. and Japan's Mitsubishi UFJ Financial Group Inc. have in recent months taken stakes in Indian shadow lenders.

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What it means for IIFL and investors

Nirmal Jain and Blackstone India Private Equity Chief Investment Officer Mukesh Mehta said the new capital will reinforce IIFL Finance's balance sheet and fund expansion, including technology investments and co-lending partnerships with banks. The firm said it intends to collaborate with IIFL's management to support continued growth. Following the raise, the capital adequacy ratio at IIFL Finance is expected to be about 30%, versus a pro forma figure of roughly 17% as of September.

The backdrop is supportive for lenders. Ownership limits and other rules can still complicate deals, but capital continues to flow into the sector.

The bottom line: this deal brings another major global investor into India's nonbank lending space and gives IIFL more room to grow. For your portfolio, it is one more signal that credit growth and foreign capital are pulling in the same direction.

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