SoftBank may abandon the plans to invest in Piramal Capital and Housing Finance, four people familiar with the matter told Economic Times.
The Piramal Group was holding talks with Masayoshi Son’s venture fund to raise around USD 1 billion in a stake deal with a view to hive off the housing finance division.
Piramal Group’s reluctance to shift from wholesale loans to consumer lending was one of the major red flags for the Soft Bank to close the deal, the sources told ET.
“The Piramal Group has traditionally been focused on wholesale or corporate loans. Shifting almost completely to consumer was not something the leadership was comfortable with,” the source said.
The Piramal Group’s wholesale real estate exposure is just over 60%. Housing finance accounts for 9% of its overall book.
Multiple sources confirmed Bajaj Finserv, with its strong consumer lending business, was SoftBank’s first option. The latter gave up on Bajaj Finserv since it was a listed company.
India’s digital lending market has the potential to become a USD 1 trillion opportunity in the next five years, according to a 2018 BCG report.
The SoftBank also pushed to turn the financing arm into an end-to-end tech enabled platform like Rocket Mortgage in the US. “This was a good aim to have but not possible in India because of the amount of red tape and regulations,” the source said.
Differences also erupted on the timeline of the exit.
“The problem was that there are very few others who could write a cheque that large or give Soft-Bank an exit even at face value if the exit timeline lapsed,” the person added.
The Piramal Group is already holding discussions with Chinese and American private equity companies to cut a deal.
The sources have, however, not completely ruled out the possibility of a deal saying the ticket size is too big for the deal to collapse easily.