MC EXCLUSIVE Mizuho–Avendus deal enters final stage of conclusion

Reports suggest that a few minority investors were not happy with the exit valuations offered by Mizuho

After months of negotiations, largely focused on exit terms for investors and ironing out differences in valuation expectations, highly placed sources aware of the talks say Mizuho’s plan to buy KKR’s stake in Avendus Capital should fructify soon. “Talks are entering the final stages and it’s in the process of agreeing on terms between the exiting investors, particularly those holding smaller stakes, and Mizuho,” said a person who did not want to be named.

It is understood that the promoters of Avendus and a few smaller shareholders, including Gaja Capital, are more or less in agreement with the exit terms proposed by Mizuho. “While nothing is certain till a deal is announced, at this stage I don’t think anyone would prevent the deal from reaching a logical conclusion,” said another source involved in the talks. “Once there is consensus among the smaller investors and all of them are on the same page after their independent rounds of legal vetting, the deal could close in 2–3 weeks,” he said.

"We are in the midst of the process and would not like to comment at this stage," said a spokesperson for Avendus Capital when comments were sought on the deal’s progress.

All on same page
To be sure, reports suggest that a few minority investors were not happy with the exit valuations offered by Mizuho and contended that they were not being treated at par with KKR with respect to the exit terms. “Some upward revision to valuations may have happened subsequently because now more or less the minority investors too seem to be in agreement with the terms offered,” said a banker.

Role of founders
It is understood that in the coming days there would be better clarity on which promoters would stay invested in Avendus post the deal closure. For now, it is understood that Gaurav Deepak, co-founder and CEO of Avendus Capital may choose to stay post the Mizuho deal. He is expected to retain his current role.

Kaushal Aggarwal, also a promoter, who is currently overseeing the credit solutions and wealth management business may too stay with the company post the deal, though details of his future role is not yet clear. Ranu Vora, the founder and the initial brain behind Avendus Capital is likely to cash out his stake.

Promoters have about 5 – 7 percent stake each in the company, while Gaja Capital and Yogesh Mahansaria, founder and CEO of Alliance Tire Group, collectively hold about 20 percent stake. US private equity major KKR is the single largest shareholder with 63 percent stake.

From possible IPO to complete exit
KKR which acquired a majority 55 percent stake in Avendus back in 2015 is said to have been contemplating multiple monetization options since early 2022, including taking the company public.

However, around early 2024, KKR decided to make a complete exit by way of a sale process. It tested investor interest in mid-2024 and a formal bidding process was initiated in December. Nomura was appointed to run the process. It was later replaced by Rothschild, when Nomura itself evinced interest in the business of Avendus.

Carlyle, Nomura, and Mizuho put in binding bids in December. The valuation offered by Mizuho (roughly USD 700 million or Rs 6,200 crore) topped the charts.

Sources say that in June–July this year, KKR and Mizuho were almost ready to announce the deal, it did not happen as some minority investors were not agreeable to the exit terms. A few of them wanted to again explore the option of taking the company public rather than sell to Mizuho.

However, considering the current market conditions, those plans were dropped and a large section of the minority investors including the founding promoters opted to accept the terms offered by Mizuho. “The dissent is now pretty much taken care of,” said a banker. He indicated that in a few weeks formal legal process for the deal closure, including finalization of the agreements, should start.