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JM Financial board okays plan to consolidate debt, distressed credit business under one platform

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JM Financial (JMFL) has agreed to consolidate its holding in wholesale debt syndication and distressed credit business under one platform. In a meeting on Saturday, the company’s board of directors approved a proposal in which JM Financial will acquire 42.99% stake in JM Financial Credit Solutions Limited (JMFCSL) for a consideration of approximately Rs 1,282 crore.

Post the transaction, the stake held by JMFL in JMFCSL shall increase from 46.68% to 89.67%.

The board also approved acquisition of 71.79% stake in JM Financial Asset Reconstruction Company (JMFARC) by JMFCSL from JMFL for a consideration of approximately Rs 856 crore, a company release said.

Post-transaction the stake held by JMFCSL in JMFARC will increase from 9.98% to 81.77%. The proposed transaction will result in a net cash outflow of approximately Rs 426 crore from JMFL and will be funded from surplus cash.

The proposed transaction will happen subject to applicable regulatory, shareholders’ and other approvals and is expected to be completed in 3-6 months, the release said.The company has cited consolidation of its distressed credit business under its wholesale debt syndication platform — JMFCSL — as strategic rationale behind the decision.”The platform shall leverage the experience of its talent pool through different economic cycles to achieve higher risk adjusted returns,” the company statement said.“Over the last 15 years, JM Financial Group has developed significant expertise and relationships both in the wholesale and distressed credit businesses. This expertise shall be channelised to pivot from an on balance sheet business model to a diversified originate to distribute / syndication model across asset classes,” the release said further.

The group’s share in the consolidated profits will accordingly increase and JMFL will have enhanced control of JMFCSL including capital allocation and distribution of profits, the release said.

Post the consolidation of shareholding, JMFL’s investments will primarily be towards the expansion of both its retail capital market led business and retail home financing business.

Commenting on the development Vishal Kampani, Non – Executive Vice Chairman of JM Financial, said, “The Proposed Transaction shall align our corporate and capital structure offering greater flexibility to optimise capital allocation and distribution of profits to our shareholders. We foresee significant long term growth opportunities emerging for our businesses and are well positioned to leverage them in the evolving market scenario.”

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