Sovereign wealth funds, private equity firms, and strategic investors are among 12-14 entities competing for a stake in Housing Development Finance Corp.’s Credila education loan unit, according to two people aware of the development.
Abu Dhabi Investment Authority (ADIA), Singapore’s GIC, Blackstone, BPEA EQT (formerly Baring Private Equity Asia), and Warburg Pincus are some of the suitors that have expressed interest in acquiring a stake in HDFC Credila Financial Services Ltd (Credila), the people said on the condition of anonymity.
Among lenders, IndusInd Bank and Kotak Mahindra Bank are considering a bid for Credila, one of India’s largest education loan financiers, one of the people said, adding that Tata Capital was also interested but might have decided against bidding due to the restricted shareholding structure.
A steady increase in the number of Indians pursuing higher education, along with rising education costs both in India and abroad, has led to continued growth in education loan demand in the country.
Warburg Pincus already owns a majority stake in rival education loan financier Avanse Financial Services Ltd, while Blackstone has a majority stake in mortgage lender Aadhar Housing Finance. BPEA EQT has a minority stake in RBL Bank, while GIC and ADIA have investments in several Indian lenders. GIC also has a stake in HDFC itself.
Spokespersons for Blackstone and ADIA declined to comment, while email queries to spokespeople for BPEA EQT, Warburg Pincus, GIC, Tata Capital, Kotak, IndusInd Bank, and HDFC did not elicit a response. HDFC selected Jefferies Financial Group Inc to manage the sale of Credila and could seek a value of as much as $1 billion (around ₹8,100 crore), one of the two people said.
Last week, Keki Mistry, chief executive of HDFC, said the company received several bids for its Credila stake, without naming the bidders.
The mortgage lender needs to reduce its stake in HDFC Credila to 10% over the next two years and stop onboarding new customers, according to a Reserve Bank of India (RBI) directive for its merger with HDFC Bank.
“A variety of people are calling and making bids, and we are still collating all that,” Mistry had said. On 25 April, Mint reported that HDFC would make a representation to the RBI to let HDFC Credila continue signing up customers until it finds a buyer.
Brothers Anil and Ajay Bohora founded Credila Financial Services as an education loan financier in 2006.
A year later, DSP Merrill Lynch bought a 40% stake in the lender. HDFC acquired the stake held by DSP Merrill Lynch in Credila back in 2009, following the acquisition of DSP Merrill Lynch by Bank of America.
The Bohora brothers exited HDFC Credila in December 2019, with HDFC acquiring their 9.12% ownership for around ₹395 crore ($56 million), valuing HDFC Credila at $614 million (approximately ₹4,331 crore).
As of 31 March, Credila had a loan book of ₹15,238 crore. Net profit rose to ₹276 crore in the year ended 31 March from ₹206 crore in FY22. Its gross non-performing assets ratio stood at 0.17% on 31 March, compared to 0.24% as of 31 December.
