Buyout group BPEA EQT and Indian private equity firm ChrysCapital have agreed to acquire a stake of around 90% in education finance company HDFC Credila Financial Services Ltd in a deal worth a total of about 11,063 crore ($1.3 billion).
The two PE firms will buy the stake in HDFC Credila from Housing Development Finance Corporation (HDFC) for about Rs 9,060.5 crore ($1.1 billion). They will also infuse Rs 2,003 crore as fresh capital into Credila, HDFC said Monday.
The announcement comes less than a month after VCCircle reported in late May that BPEA EQT was leading the race to buy the stake and that it could partner ChrysCapital.
In a regulatory filing late Monday, the country's largest mortgage financier said Kopvoorn BV, Moss Investments Ltd, Defati Investments Holding BV and Infinity Partners will acquire about 132.9 million shares of HDFC Credila. HDFC also said the consortium valued HDFC Credila at a preâ€money valuation of Rs 10,350 crore.
Kopvoorn is part of BPEA EQT, which was earlier known as Baring Private Equity Asia and was remained after it was acquired by Swedish buyout firm EQT. Moss Investments, Defati Investments and Infinity Partners are part of ChrysCapital. The investment agreement was executed on Monday, the filing said.
Separately, ChrysCapital said it plans to invest over $250 million (Rs 2,050 crore) in HDFC Credila of the total $1.3 billion consortium investment. This transaction is the fourth investment and third buyout from ChrysCapital’s latest $1.4-billion ninth fund, and is also the fund’s second buyout in the financial services sector after the investment in Bandhan Mutual Fund earlier this year.
The latest transaction will require approvals from the Reserve Bank of India, which regulates HDFC as well as HDFC Credila, and antitrust watchdog Competition Commission of India. The long stop date is March 31, 2024, the filing added.
As per the proposed transaction, HDFC Credila will cease to be a subsidiary of HDFC and the mortgage lender’s stake in the education loan financier will be 9.99%. Currently, HDFC owns 100% of HDFC Credila.
On April 21, HDFC had informed that HDFC Bank had made certain requests to the RBI which provided some clarifications to the bank. Under the letter, the RBI had said that HDFC must bring down its shareholding in HDFC Credila to 10% within two years from the effective date of the merger of HDFC and HDFC Bank.
Earlier, VCCircle reported that several strategic players as well as large private equity firms such as Blackstone, Warburg Pincus, and sovereign wealth funds such as Abu Dhabi Investment Authority (ADIA) and Singapore’s GIC had expressed interest in acquiring a stake in Credila.
Brothers Anil and Ajay Bohora founded Credila Financial Services as a dedicated education loan financier in 2006. A year later, DSP Merrill Lynch invested to buy a 40% stake in the lender. After DSP Merrill Lynch was acquired by Bank of America, HDFC bought the stake held by DSP Merrill Lynch in Credila in 2009.
The Bohora brothers exited HDFC Credila in December 2019 with HDFC acquiring their 9.12% ownership for around Rs 395 crore ($56 million), valuing the lender at $614 million (around Rs 4,331 crore).
As on March 31, 2023, Credila had a loan book of Rs 15,238 crore. For FY23, it reported a net profit of Rs 276 crore as against Rs 206 crore in FY22. Its gross non-performing assets ratio stood at 0.17% on March 31, compared with 0.24% as of December 31, 2022.
Jefferies was the adviser on the HDFC-Credila deal.
*The headline and text of this article have been updated to include details of ChrysCapital's investment.