Avanse Financial Services Ltd, an education-focused non-banking financial company (NBFC), closed its first securitization transaction to raise Rs 357 crore (around $48 million). The deal was facilitated by debt financier Northern Arc Capital.
Securitisation is a financial tool used for selling a pool of loans to investors to free up cash or capital.
The long-term funding is for a period of 10 years, the company said adding that the funding will support the expansion of Avanse Financial Services’ education financing program and thus, strengthen its leadership position in the lending space.
“This is a significant milestone as it is the first securitisation transaction in the education loan space, invested by a global financial institution establishing this segment as an asset class at an international level. It has enabled us to boost our diversified long-term stable funding strategy,” said Amit Gainda, CEO of Avanse Financial Services.
In March 2019, private equity firm Warburg Pincus had agreed to acquire an 80% stake in Avanse Financial Services from Wadhawan Global Capital Ltd and its unit Dewan Housing Finance Corporation Ltd (DHFL). World Bank's private-sector investment arm International Finance Corporation (IFC) has retained a 20% stake in Avanse.
The non-bank lender said it has offered loans to around two lakh students studying both in India and abroad. Avanse has also provided growth and working capital to about 1,000 educational institutes. It offers loans to students for both international and domestic studies, for online education, for school fee financing, for skill development courses, and lends working and growth capital to educational institutions in India.
Bama Balakrishnan, COO, Northern Arc Capital said, “We are pleased to structure, facilitate and co-invest in this notable securitization transaction. Education financing is a bourgeoning segment in India, and we foresee several innovative models emerging in this space. Avanse has been an early mover, demonstrating consistent growth and making access to high-quality education a reality for thousands of students in India.”
Northern Arc Capital (formerly known as IFMR Capital Finance) is a digital debt platform that caters to the under-banked in the Indian financial services sector. It was set up primarily to provide access to debt capital to meet the diverse credit requirements of under-served households and businesses.
Over 140 players (banks, asset managers, insurance companies, DFIs, etc.) have invested in transactions structured and arranged by Northern Arc Capital. It manages over Rs 2,000 crore ($300 million) in commitments.
The Chennai-based lender has filed its Draft Red Herring Prospectus (DRHP) with the market regulator the Securities and Exchange Board of India (Sebi) to raise funds through an initial public offering (IPO).
