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January 10, 2008 The Economic Times

Carlyle group invests $28 m in Repco Home

Fund Infusion from PE Major To Help Expand RHF’s Loan Portfolia, Branch Network

Private Equity firm Carlyle group has invested $27.7 million in Repco Home Finance (RHF), the state-owned Repco Bank’s subsidary that focuses on the rural and semi-urban housing loan market. The investment will come from Carlyle Asia Growth Capital Partners, a $680-million fund that invests in companies in India, China, Japan and Korea. The fund will be used to expand RHF’s branch network and loan portfolio, its top official said. M Balasubramanian, managing director, Repco Home Finance said the fund will help it to keep growing at 50%.

“We plan to increase branches from 26 to 50, go beyond South India to North and increase our business to Rs 2,500 crore by 2011 from about Rs 600 crore now”, he said. End of March 2007, RHF had loans outstanding of Rs 441.84 crore up 48.44% from Rs 297.66 crore a year earlier. It had reported a net profit of Rs 11.53 crore on a total income of Rs 44.27 crore in 2006-2007.RHF’s parent Repco Bank would retain its majority shareholding in the home finance equity. Carlyle will have two board members in RHF.

Veda Corporate Advisors facilated the transaction. Repco would go for an IPO after two years to give an exit for Carlyle. Balasubramanian said the company was in talks with various banks for the last two years for fund infusion before lookint at private equity option. “Though foreign banks evinced interest, it could not happen because of certain regulations. Besides the securitisation market is not well developed in India. So we initiated talks with private equity firms instead”, he said. Floated in 2000, Repco Home Finance currently has network of 26 branches across Tamil Nadu, Andhra Pradesh, Karnataka and Puducherry and is planning to open branches in state such as Maharashtra and Haryana.

Nearly 70% of the bank’s lending happens in rural areas. This is a result of the bank’s conscious effort to focus on retail business in the tier-II and tier-III cities, Balasubramanian said. After Carlyle’s fund infusion, Repco Home Finance is planning to raise roughly Rs 100- Rs 150 crore through debentures within a year, the first time it would use this opti9no. So far, it has been borrowing from National Housing Bank and public sector banks.

“Association with Carlyle will help in enhancing credentials to raise debt, especially in the international market”, Balasubramanian said. Repco Home Finance is targeting a total business of Rs 600-650 crore by the end of the year. This is Carlyle group’s second investment in the housing finance space in India. Last year, it invested $650 million in Housing Development Finance Corporation (HDFC) for a 5.6% stake. Carlyle’s other investments in India include Allsec Technologies (August 2006), Claris Lifesciences (March 2006), Financial Software & Systems (November 2000), LearningMate Solutions (October 2003) and Newgen Imaging Systems.