FILE PHOTO - The entry to the Home Capital Group's headquarters is seen at an office tower in the financial district of Toronto, Ontario, Canada on May 1, 2017. REUTERS/Chris Helgren

TORONTO (Reuters) - Home Capital Group Inc HCG.TO could face a revolt over U.S. billionaire Warren Buffett's plan to increase his stake in the business after proxy advisory firm Institutional Shareholder Services (ISS) recommended shareholders vote against it.

Home Capital and Buffett's Berkshire Hathaway Inc BRKa.N investment vehicle agreed in June to a deal worth up to C$400 million ($318 million) for an initial stake of 20 percent in the business. The position could increase to 38 percent if Home Capital shareholders give approval in a vote on Sept. 12.

Under the terms of the deal, Berkshire Hathaway can purchase the additional shares at a price of C$10.30 per share. Shares in Home Capital rose 1.6 percent at C$13.45 on Wednesday.

Home Capital benefited from Buffett’s initial investment as well as a C$2 billion credit facility. The deal helped rebuild confidence in the financial strength of the company after depositors withdrew funds from its high interest savings and Guaranteed Investment Certificate accounts.

Home Capital’s executives had emphasized the importance of having an investor of Buffett’s credibility backing the company.

However, ISS said much of the benefit is already in place after the initial transaction and questioned the benefits for Home Capital’s shareholders of Buffet increasing his stake.

“The proposed Berkshire second tranche appears to offer nominal additional reputational and strategic benefits to those already established under the Berkshire first tranche, while dilution cost of the discounted second tranche is substantial,” ISS said in a statement.

($1 = 1.2593 Canadian dollars)