Sagen is a Brookfield portfolio company

India Mortgage Guarantee Corporation (IMGC) has announced that Sagen MI Canada has signed a definitive agreement to acquire about 31 per cent stake in the former in a primary funding round.

This is Sagen’s first strategic investment in India, per IMGC’s statement. However, IMGC did not disclose the valuation at which Sagen picked up 31 per cent stake.

“With this, Sagen will become the second largest shareholder (after Enact Holdings, Inc.). The proposed transaction will close after receipt of customary statutory and regulatory approvals

“...The proceeds will provide growth capital to the business and support the enhancement of operational and technological capabilities while maintaining a robust risk management framework,” according to the statement.

IMGC gives mortgage guarantees to home loan providers against borrowers’ payment defaults. Its current shareholders include Enact Holdings, Inc., National Housing Bank (NHB), International Finance Corporation (IFC) and Asian Development Bank (ADB).

Sagen, which is the largest private-sector residential mortgage default insurer in Canada, is owned by Brookfield Business Partners L.P, which is a group entity of Brookfield Asset Management Inc.

As at March-end 2021, Enact Holdings, Inc. (ultimately owned by Genworth Holdings Inc., which is a subsidiary of Genworth Financial, Inc.) was the largest shareholder (48.68 per cent stake) in IMGC, followed by NHB (29.64 per cent), and IFC and ADB (10.84 per cent each).

Mahesh Misra, CEO, IMGC said, ”As the first ‘Mortgage Guarantee’ company in India, IMGC’s endeavor is to empower the housing finance ecosystem and promote early home ownership.

“We look forward to leverage Sagen’s global experience to drive innovation and transformation to further deepen the mortgage guarantee market in India.”

IMGC has guaranteed over 70,000 home loans amounting to more than Rs 15,000 crore through its partnership with 19 lenders, including Banks and Housing Finance Companies, the company said.

Late last month, ICRA observed that as IMGC has witnessed a decline in its net worth over the last few years, it needs to raise capital to maintain the minimum required net owned funds (NoF) of Rs. 100 crore.

Although the agency noted that the (capital raising) process has taken longer than anticipated, the company is in advanced stages of equity infusion and its ability to conclude the same in a timely manner will remain a key rating sensitivity.

ICRA said IMGC’s position as the only mortgage guarantor in the country and the significant business potential with steadily increasing traction towards its product proposition, though much lower than anticipated, provides ample growth opportunity.

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