A mega stake sale is in the works at Aavas Financiers Ltd (formerly known as AU Housing Finance Ltd), as Kedaara Capital and Partners Group are weighing a complete exit eight years after jointly acquiring the affordable housing finance firm, four persons in the know told Moneycontrol.
Currently, both the private equity players, classified under the promoter category, own a combined 26.47 percent stake in Aavas Financiers.
If the entire stake is sold to an incoming suitor, it would trigger the open offer threshold as per Sebi norms to acquire an additional 26 percent from public shareholders and result in a change in control.
Based on the market cap of Aavas Financiers at the end of day's trade on July 3, which stood at Rs 14,703 crore, the stake owned by Kedaara Capital and Partners Group is worth Rs 3,891 crore.
At these levels, a majority stake of at least 51 percent stake in the firm is worth around Rs 7,498 crore.
"Kedaara Capital and Partners Group have been invested for many years, got the firm listed and have scaled it up. They are now evaluating options to monetize their balance stake to either a private equity or strategic investor," said one of the persons above.
Incidentally, both Kedaara Capital and Partners Group have diluted part stake earlier in the year via the block deal route. In March, both firms divested 12.6 percent in Aavas Financiers for Rs 1,369 crore.
A second person told Moneycontrol that investment bank Jefferies has been mandated as the sell side advisor.
"Three to four parties are conducting due diligence on the deal. It's a large cheque and affordable housing finance is a promising sector to look at, " this person added, without elaborating on the names of the suitors.
Two other persons also confirmed the stake sale plans and the ongoing process.
One of them added that private equity interest was high in the proposed transaction.
"Let us see how the deal progresses. What if someone is keen on picking up less than 25 percent stake? But whoever enters will become the single largest shareholder in the firm," he elaborated.
In recent times, the likes of Bain Capital, CVC Capital, Advent International, Warburg Pincus, Mubadala and Ontario Teachers Pension Plan have evinced interest in NBFC deals or struck them.
All the four persons above spoke to Moneycontrol on the condition of anonymity.
When contacted, Kedaara Capital and Partners Group declined to comment.
Email queries and multiple reminders sent to Aavas Financiers and the firm's MD and CEO were left unanswered at the time of publishing this article. Jefferies couldn't be reached for an immediate response.
A closer look at Aavas
In February 2016, a Kedaara-Partners JV acquired Aavas Financiers Ltd for around Rs 950 crore, according to media reports. The firm was listed in October 2018 and its share price has risen by around 18.73 percent in the last six months.
Some of the shareholders of Aavas in the public category include SBI Small Cap Fund (8.86 percent), UTI Flexi Cap Fund (3.06 percent), Amansa Holdings Private Ltd (3.10 percent) and ADIA (2.50 percent).
For FY23-24, the NBFC had a net profit of Rs 490.69 crore and revenues of Rs 2,017.50 crore. It reported a 20 percent uptick in disbursements to Rs 1,890 crore during the January-March quarter. Assets under management also rose 22 percent to Rs 17,300 crore during the same period.
Also Read: Aadhar Housing CEO: Eventually it will be a two-horse race between us and Aavas Financiers
According to its website, Jaipur-based Aavas is engaged in the business of providing housing loans, primarily, in under-served markets which include the states of Rajasthan, Maharashtra, Gujarat, Madhya Pradesh, Haryana, Uttar Pradesh, Chhattisgarh, Uttarakhand, Punjab, Himachal Pradesh, Delhi, Odisha, and Karnataka. Currently, the firm is operating with a total of 371 branches, the website added.
NBFC sector buzzing with deal activity
Here's a slice of some of the frenetic deal action from the NBFC segment this year.
In February, digital non-banking finance company Credit Saison (CS) India said Japan's Mizuho Bank acquired 15 percent stake in it for Rs 1,200 crore.
Warburg Pincus- and Kedaara Capital-backed Avanse Financial Services, an education-focused non-banking financial company (NBFC), announced on March 26 that it has raised primary capital of Rs 1,000 crore.
This round of funding was led by Mubadala Investment Company, an Abu Dhabi-based investment company, with participation from Avendus PE Investment Advisors Private Limited through its fund Avendus Future Leaders Fund II.
Avanse later filed draft papers for a Rs 3,500-crore IPO.
Top Chennai-based retail NBFC Shriram Finance announced the sale of its subsidiary Shriram Housing Finance to global private equity firm Warburg Pincus for Rs 4,630 crore on May 13.
On December 14, Moneycontrol was the first to report that the listed parent had revived stake sale plans to unlock value in Shriram Housing Finance and launched a process to sell a controlling stake in the arm.
Also Read: 'Shriram HF acquisition is a Deja Vu moment for us', says Narendra Ostawal of Warburg Pincus
Blackstone-backed Aadhar Housing Finance listed on the stock exchanges on May 15. The firm's share price has increased by 25 percent in last month.
Recently, vehicle financier Kogta Financial raised $148 million in a Series E funding round from Ontario Teachers’ Pension Plan, giving the Canadian pension fund a significant minority stake in the Jaipur-based non-bank lender.
Moneycontrol was the first to report the fund raise on June 26.
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