Morgan Stanley PE unit close to buying 20% in Centrum HF

MUMBAI: A private equity fund managed by Morgan Stanley is in advanced talks with Centrum Group to pick up a 20% stake in its housing finance subsidiary, valuing the firm at Rs 1,000–Rs 1,200 crore, as the Mumbaibased financial services firm looks to tap into an expected uptick in home buying in the coming fiscal year.

Centrum group had been in talks with a couple of other PE funds, including New York Life-backed Jacob Ballas, but Morgan Stanley Private Equity has emerged as the frontrunner, multiple sources with direct knowledge of the matter told ET.

A binding agreement to this effect is expected to be signed this week and a formal announcement is due later this month, sources said.


When contacted, Centrum and Morgan Stanley declined to comment. Jacob Ballas did not respond to an email seeking comment till press time.

Centrum Housing Finance, which started operations in 2016, is a stepdown subsidiary of Centrum Capital, the listed group entity of Centrum. The firm reported revenue of Rs 37.64 crore in financial year 2019 compared to Rs 10.4 crore in the previous year. Its profit after tax stood at Rs 1.4 crore during the period compared with Rs 18.9 lakh in FY18, its annual report showed.

The company has 26 branches across six states. The investments are expected from Morgan Stanley’s Asia platform, which recently made the first close of $366 million for its fifth Asia fund. The investment vehicle, which aims to raise as much as $2 billion eventually, will look at minority investments in sectors such as consumer products, industrial products, financial services, healthcare and telecom and technology. In September 2018, Morgan Stanley CEO James Gorman told ET that it will expand its businesses and invest more capital in India.

New York Life-backed Jacob Ballas had invested $50 million in Centrum Direct, the foreign exchange business group of Centrum in 2017. The Indiafocused fund, which manages close to $600 million across three separate funds, has investments in Adlabs, Karaikkal Ports and Vivimed Labs.

"For standalone non-banks, the investor comfort with asset classes they operate in will dictate their access to funds at competitive rates, growth outlook and the extent of reorientation of business models," Crisil Research said in a note last December.