ICICI Bank may sell Home Finance arm for Rs 4,400 crore; Citibank roped in to find buyers

MUMBAI: ICICI Bank may sell its housing finance arm, ICICI Home Finance, to investors such as private equity funds, according to people close to the development. The bank may be expecting a valuation of around $700 million, or Rs 4,400 crore, according to two potential investors who have been approached.

Citibank has the mandate for the transaction, said the people cited. The bank had invited the investment bank to pitch for the mandate three months ago and the decision to appoint Citibank was taken about a fortnight back.

"The mandate was given recently and some private equity players and a couple of other investors have been approached by the investment bank. Although it's too early to say but some PE players may consider entering the housing finance sector," a person close to the development said.

"ICICI Bank keeps receiving enquiries from time to time from interested parties regarding its stake in ICICI HFC but has not taken any decision to sell its stake in this company," a spokesman for ICICI Bank said.

"ICICI Bank's mortgage business is primarily done within the bank and this business has been growing rapidly. Only a very small portion of the bank's overall mortgage business is done by ICICI Home Finance Company," he added. ICICI Home Finance contributes about 10% of the book value of total home loans given by ICICI. "ICICI Home Finance focuses on home loans in smaller cities and has smaller ticket size," a bank official said.

Citibank declined to comment on the matter. The deal will require RBI approval as ICICI Home Finance is an NBFC. On Thursday, RBI issued a circular saying sale of NBFCs was subject to the regulator's approval.

Industry trackers say that it makes sense for the bank to exit the lower end of the home loan business. "Even the banking regulator has time and again told banks to focus on their core business. Exiting the smaller ticket size market would also help the bank maintain a healthy CASA (current and saving account) ratio," a senior banking analyst with a consultancy said.

"At a time it doesn't make much sense for a big bank like ICICI that has 90% of its home loan book value coming from bigger loans to focus on smaller loans," the analyst added. In February this year, Carlyle Group, the USbased private equity company acquired 49% in PNB Housing Finance from Destimoney Enterprises for Rs1,600 crore.

"Funds are looking at housing finance sector given the overall housing shortage in India as well as the robust growth (around 20%) seen in the past 4-5 years, and is likely to continue growing at a similar rate," said Bhavik Hathi, senior director, Alvarez & Marsal. Another person not directly involved in the transaction said many investors who were not able to get their "hands on PNB Housing Finance" may get interested in ICICI Housing Finance.