MC EXCLUSIVE Mizuho to close in on Avendus deal in a week

Mizuho

A near year-long negotiation between Mizuho and investors in Avendus Capital, notably majority shareholder KKR, seems to be headed for closure soon. Highly placed sources aware of the development say the board of Avendus is set to meet next week to consider the offer from the Japanese major to acquire majority control.

Post the board approval, anticipated early next week, a formal deal announcement is expected.

It is gathered that KKR, which holds a little over 60 percent stake, has agreed to make a complete exit from the company at a valuation of Rs 6,000- 6,200 crore. Other institutional investors, including Gaja Capital and Yogesh Mahansaria, founder and CEO of Alliance Tire Group, collectively holding 20 percent stake in the company, are also expected to tender their shares to Mizuho, at the valuation offered to KKR.

Role of promoters

According to bankers aware of the deal talks, the founder promoters may be offered an exit at a premium valuation, though the quantum of premium could not be ascertained. However, two among the three promoters, namely Gaurav Deepak, co-founder and CEO of the company and Kaushal Aggarwal, co-founder, presently overseeing the credit solutions and wealth management business of the firm, are expected to continue with the company.

Ranu Vora,  one of the founders of Avendus, and the company’s face in its early years, may seek an exit from the investment banking outfit.

“GD (Gaurav Deepak, as he is colloquially referred to by his friends) and Kaushal have been given an option to stay with the company after the Mizuho takeover. As per the present terms, they could continue to remain at the helm for 2 – 3 years after the deal,” said another banker who didn’t want to be named. “Mizuho may be okay if both choose to stay longer as well,” he added.

Sources familiar with the matter indicate that the continuing promoters may have been offered a deal valuation at a slight premium to Vora’s exit multiple. Presently founders hold about 7 percent stake each, collectively adding to about 21 percent of equity.

“We cannot comment at this stage,” said an official spokesperson for Avendus, when asked for comment on the board meeting and deal contours.

Mizuho entry into Avendus would mark another high-profile Japanese investment in India’s financial sector following Sumitomo Mitsui Banking Corporation (SMBC) emerging as the single largest shareholder in YES Bank earlier this year after it brought out stakes of SBI and others.

Long drawn exit process

KKR acquired a 55 percent stake in Avendus in 2015 and subsequently increased it to over 60 percent when Gaja and Mahansaria joined the league table. Since 2022, the US private equity major is said to have been contemplating multiple monetisation options, including taking the company public. However, around early 2024, KKR decided to make a complete exit by way of a secondary sale to a strategic investor. Formal bids were called in December last year, with Carlyle, Nomura and Mizuho emerging as the key contenders.

However, the sources cited indicate that valuations offered by Mizuho (roughly $700 million or Rs 6,200 crore) topped the charts. Mizuho was the frontrunner pretty much from the start, said the sources. Questions around which of the three promoters and institutional investors would seek an exit post Mizuho’s acquisition and at what valuations were the contentious aspects and are believed to have resulted in a prolonged negotiation process.