MC EXCLUSIVE Marquee investors TIAA, Accion, Motilal raise stake in IKF Finance after funding round upsized to Rs 800 crore

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Hyderabad-based NBFC IKF Finance has upsized its ongoing funding round to Rs 800 crore, or $96 million, with existing institutional investors increasing their stakes, people familiar with the matter told Moneycontrol, following up to an earlier newsbreak.

It was previously reported that IKF was in talks to raise $70–80 million in fresh capital, with American private equity form Norwest Venture Partners joining in as a new investor. Sources now indicate that the round has been upsized to $96 million, with fresh capital coming from existing investors, promotor and founder VGK Prasad, along with Norwest.

Read More: Hyderabad-based NBFC IKF Finance nears $70-80 million funding deal from a sovereign fund, Norwest

The deal will see TIAA (Teachers Insurance and Annuity Association of America), Accion Digital Transformation Fund, Motilal Oswal Wealth, and India Business Excellence Fund IV (managed by Motilal Oswal Private Equity) top up their investments.

While the individual investor increases remain undisclosed, the existing institutional investors are collectively boosting their stakes to hold around 20–21% of the company post the fund raise.

Currently, the promoters hold 42.84 percent in the NBFC, while Motilal Oswal and Accion together own approximately 29.72 percent, with TIAA holding around 7.96 percent.

This marks one of the largest primary equity raises by an NBFC in recent months, underscoring the growing domestic and foreign investor appetite for MSME lenders. Investors like Avataar Ventures, Sofina, Madison, Ontario Teachers’ Venture Growth (TVG), Prosus, Accion, and TIAA have placed bets on NBFCs like Finova Capital, Mintifi, Flexiloan among others in the past 12 months.

Inside IKF Finance: Expanding Reach 

This will rank among IKF Finance’s largest-ever fundraises. Previously, the company raised Rs 120 crore from TIAA in 2024 and Rs 255 crore from Accion and high-net-worth individuals (HNIs).

Founded over three decades ago as IndraKeela Financiers Private Limited by VGK Prasad, IKF Finance has evolved into a key regional NBFC. In 2007, Prasad’s elder daughter, K Vasumathi Devi, stepped into leadership and was named managing director in 2022, while his younger daughter, Vasantha, now heads the company’s housing finance subsidiary, IKF Home Finance.

The company was converted into a closely held public company in 1994, got listed in 1995, and later delisted from the Bombay Stock Exchange and Ahmedabad Stock Exchange in 2015.

IKF Finance has built a stronghold in Andhra Pradesh and Telangana, which together account for nearly 70 percent of its assets under management (AUM). The company has been steadily expanding into new markets like Odisha, Gujarat, Tamil Nadu, Karnataka, Maharashtra, Madhya Pradesh and Rajasthan.

It ramped up its branch network from 134 to 165 in FY24 and to 179 branches by September 2024, Care Ratings data shows.

It operates mainly in two segments: Used vehicle financing — covering commercial vehicles, construction equipment, and three- and four-wheelers, which make up about 78 percent of AUM. The second is high-ticket SME lending — including loans to other NBFCs.

The housing finance arm, IKF Home Finance, focuses on home loans and loans against property (LAP).

NBFCs get breather as RBI restores risk weights on loans from banks

In FY24, IKF Finance disbursed Rs 3,145 crore in loans, up 53 percent year-on-year. It reported a profit after tax (PAT) of Rs 100 crore on a total income of Rs 586 crore, reflecting 64 percent and 55 percent annual growth, respectively.

As of September 2024, the company’s gross NPA stood at 2.25 percent and net NPA at 1.75 percent.

Over the past three years, IKF’s AUM has grown at a 39 percent compound annual growth rate (CAGR), rising from Rs 1,777 crore in March 2021 to Rs 4,811 crore in March 2024, according to Care Ratings. By September 30, 2024, AUM had further jumped to Rs 5,386 crore, representing a 53 percent year-on-year increase.