Financial services company InCred and American private equity giant KKR, on Tuesday announced conclusion of the strategic merger of their lending businesses, almost a year after it was first announced.
The merger will result in a combined business of KKR’s non-bank lending business, KKR India Financial Services (KIFS) and InCred’s retail and MSME lending business that “will operate under the InCred Finance brand name with a $600 million (around Rs 4,700 crore) balance sheet and around an equity base of $300 million,” the company said in a statement.
“The closure of the transaction creates a non-banking finance company (NBFC) with the resources to better meet the needs of retail and micro, small and medium enterprise borrowers (MSMEs),” the companies said in a joint statement.
InCred and KKR announced the strategic merger in August 2021 in an all-stock deal after over a year of discussions.
Under the merger terms, KKR, along with two other investors in KIFS, Teacher Retirement System of Texas and Abu Dhabi Investment Authority (ADIA), will together hold a 35% stake in the merged entity InCred Finance. KKR alone will hold about 15-16% in the consortium.
InCred Finance is a strategic investment for KKR and not a portfolio company in a KKR fund, the companies said.
Stake of InCred's promoter entity, Bee Finance Ltd. (Mauritius), will get diluted from about 60% to about 40% post the merger. In the combined entity, InCred’s founder Singh will hold 26%, while about 11% will be held by Ranjan Pai and close to 2% by Anshu Jain, via InCred's holding company Bee Finance.
InCred Finance will be managed by Bhupinder Singh, founder and chief executive officer of InCred Group. Its business spans online and offline models across consumer lending, small business lending and education finance with its loan book touching $500 million.
A former Deutsche Bank executive, Singh had founded InCred Finance in 2016 as a tech-enabled lending platform.
“InCred Finance’s business has emerged in great shape from the pandemic delivering top notch risk performance. The strategic partnership with KKR significantly accelerates our ability to deliver our class leading offerings at a large scale and to capitalize on the enormous credit opportunity in India,” Singh said.
InCred Group’s equity investors include Investcorp, Oaks, Moore Capital, Elevar Equity and Paragon Partners. The Mumbai-based financial services firm also counts British-Indian businessman, investor and former Deutsche Bank chief Anshu Jain, Manipal Group chairman Ranjan Pai and founding chairman of Landmark Holdings (Dalmia Group) Gaurav Dalmia, among others, as its investors.
KKR managed two credit funds through the NBFC, from which the first fund with a corpus of around Rs 400 crore has been fully deployed and repaid. Meanwhile, the second fund continues to hold investments worth around Rs 400 crore, which is in the process and being exited and until then will be part of the InCred Finance's book going forward.
KIFS, which was founded in 2009, provides Indian businesses with financing solutions.
“This merger combines the strengths of InCred Finance and KIFS to create a market-leading lending platform with the enhanced resources and expertise to meet the diverse funding needs of Indian customers. KKR is pleased to remain involved with the business as a strategic partner,” said Gaurav Trehan, partner and CEO of KKR India.