Mumbai: Usually it’s the other way around. However, like reverse brain drain, an Indian finance services company, Indiabulls Housing Finance, is acquiring a 39.8% in UK’s OakNorth Bank for $100 million.
OakNorth is a London lender that aims to challenge the dominance of large global majors like HSBC, Barclays, Lloyds and Royal Bank of Scotland in one of world’s largest financial centres.
Sameer Ghelot, chairman, Indianbulls group, also plans to acquire a 10% stake in the same bank in his personal capacity at the same valuation. The deal is one among many that may be signed in the presence of the Indian PM during his visit to London beginning today.
The Reserve Bank of India, the National Housing Bank (of India) and the Prudential Regulation Authority of the Bank of England have all approved the investment. Such regulatory approvals are the first ever to be given to an Indian corporate to acquire a large stake in a foreign bank, a company statement said. Post this deal, Indiabulls group will be the largest shareholder in the UK bank. The company has an option to increase its stake in the bank at a later stage, a company source said.
OakNorth Bank is the largest non-bank lender to the SME segment with loan disbursals to these companies at over $5 billion and outstanding SME loan assets of over $2.3 billion, the company said. OakNorth Bank is focused on the structurally under-served SME sector in the UK and will benefit from Indiabulls’ decade-plus experience in lending to this segment in India and its extensive credit processes based on cash flows of the companies, Indiabulls said. The bank will also benefit from Indiabulls’ experience in lending to small businesses, especially its loan against property (LAP) products.
In 2013, OakNorth Bank was set up by Rishi Khosla, a former adviser to India-born steel magnet Lakshmi Mittal. During its set-up phase, the bank had secured an investment from a former member of Bank of England’s monetary policy committee. A former chairman of Financial Services Authority of the UK is on its board of directors.
Commenting on the deal, Gehlot said with this investment, Indiabulls group’s total exposure in London would be in excess of Rs 4,200 crores. The group’s real estate arm is redeveloping four projects in London with a total investment outlay of Rs 3,500 crore.
For Indiabulls, the investment decision was led by K C Chakrabarty, a former deputy governor of RBI who is an independent director on the company’s board now.
