Private equity firms, including Kedaara Capital, are in talks with Warburg Pincus to buy some of its stake in education loans-focused non-banking financial company (NBFC) Avanse Financial Services Ltd, two people aware of the development said.
The deal will include primary fundraising and a secondary stake sale by Warburg Pincus, they said.
Investment banking firm Avendus Capital is managing the fundraising for Avanse, they added.
As of 31 March, the NBFC’s assets under management stood at ₹4,836 crore, growing at a compound annual growth rate (CAGR) of 22% over the last four years. Avanse has provided education loans to around 250,000 students, as well as growth and working capital to 1,000 educational institutions catering to over 500,000 students.
“While there are 5-6 investors who are looking at this asset, and the deal is still in early stages, Kedaara is the most serious bidder. The fundraise will see Warburg sell its stake worth ₹500-700 crore, while raising an equal or larger amount in primary fundraising for fuelling future growth of the lender,” said one of the two people cited above, requesting anonymity.
Email queries to Warburg Pincus, Avendus and Kedaara did not elicit any response.
Warburg holds an 80% stake in the NBFC, while the rest is held by World Bank’s private sector investment arm, International Finance Corp. Warburg had acquired Avanse in 2019 from Wadhawan Global Capital and its group firm Dewan Housing Finance.
According to a June 2022 report by rating agency CareEdge, Avanse posted operating income of ₹469.68 crore in FY22, compared to ₹438.89 crore in FY21.
The NBFC saw its profit increase to ₹63.9 crore in FY22 from ₹37.9 crore in 2020-21.
“AUM (assets under management) of the company saw moderate growth in the two years’ period ended March 31, 2021, with AUM growing from ₹2,852 crore as on March 31, 2019 to ₹3,103 crore as on March 31, 2021 on account of several factor, including discontinuation and run-down of its MSME (micro, small and medium enterprises) and LFI (financial institutions) portfolio and the covid-induced global slowdown, which resulted in the closure of international borders by several countries.
With the reopening of international borders and an increase in Indian students opting for overseas education, disbursements increased sharply from ₹977 crore in FY21 to ₹2,950 crore in FY22. This has resulted in improvement in AUM to ₹4836 crore as on March 31,” the rating agency said in its report.
