Arpwood Partners buys Karvy's small business loans for $200 million
, ET Bureau|
Updated: Nov 03, 2017, 12.05 AM IST
MUMBAI: Arpwood Partners, the private equity fund started by India’s ace investment banker Rajeev Gupta and former TPG fund manager Amol Jain, has bought out the small business loan portfolio of the non-banking financial company of Karvy Group for $200 million.
While Arpwood will bring in around $40 million to the deal, one of its limited partners (LPs), Chandler Corporation, will bring in the remaining, said three people with direct knowledge of the development.
The deal that has been in works for the last 18 months has been closed now with Arpwood carving out the retail lending portfolio consisting of small ticket micro enterprise (ME) loans, medium ticket small and medium enterprise (SME) loans, loan against gold (LAG) and small commercial vehicle (SCV) loans. The deal will leave behind the large corporate loans portfolio of the company, sources said.
The company has a loan book of more than Rs 3,000 crore. It has more than 1 lakh customers and a network of more than 75 branches in 40 locations.
Other buyers who looked at the deal were Indostar, the NBFC arm of the Everstone Group, Blackstone, Apax Partners and Advent International. Arpwood, which made heavy returns from investments in Suzlon overseas unit, raises money from its LPs on a deal-to-deal basis. Investors in a fund are known in industry parlance as LPs.
“While Arpwood will bring in 20% of capital, one of its LPs will bring in the remaining,” said one of the people quoted above. Singapore-based Chandler Corporation has been investing directly and through private equity funds in markets across Asia and the West.
Homegrown investment bank Mape Advisors helped seal the deal.
“The portfolio has been purchased by Small Business Fincredit India Pvt Ltd, the company set up recently to effect this transaction,” said another person with knowledge of the development. The company will be headed by former HDFC Bank senior executive Aseem Dhru as CEO and former Kotak Mahindra Bank senior executive Mahesh Dayani as chief business officer.
“As a part of the transaction, the entire infrastructure, branches and employee team of KFSL would be transferred to SBFC. At the time of the closing of the deal, the company is expected to have a net worth of ~Rs 590 crore (net of goodwill) and loan book of ~Rs 900 crore. SBFC plans to focus the low ticket size business loans (secured by property) and loans against gold,” rating agency ICRA said.
According to ICRA, there will be an upfront equity infusion of Rs 845 crore committed by Lyra Partners and Arpwood Partners Investment Advisors LLP into the company. This equity infusion and the proposed Rs 400 crore non-convertible debentures would fund the acquisition of the ~Rs 900 crore of loan assets from KFSL.
C Parthasarathy, chairman at Karvy Group, did not respond to emailed queries. Arpwood spokesperson could not be reached for a comment despite repeated attempts. Karvy, a stock broking and financial services group, has seen some liquidity events in some of its businesses. Earlier in the year, global PE fund General Atlantic bought a controlling 74% stake in the stock broking arm, Karvy Computershare and part stake from promoter C Parathasarathy.
While Arpwood will bring in around $40 million to the deal, one of its limited partners (LPs), Chandler Corporation, will bring in the remaining, said three people with direct knowledge of the development.
The deal that has been in works for the last 18 months has been closed now with Arpwood carving out the retail lending portfolio consisting of small ticket micro enterprise (ME) loans, medium ticket small and medium enterprise (SME) loans, loan against gold (LAG) and small commercial vehicle (SCV) loans. The deal will leave behind the large corporate loans portfolio of the company, sources said.
The company has a loan book of more than Rs 3,000 crore. It has more than 1 lakh customers and a network of more than 75 branches in 40 locations.
Other buyers who looked at the deal were Indostar, the NBFC arm of the Everstone Group, Blackstone, Apax Partners and Advent International. Arpwood, which made heavy returns from investments in Suzlon overseas unit, raises money from its LPs on a deal-to-deal basis. Investors in a fund are known in industry parlance as LPs.
“While Arpwood will bring in 20% of capital, one of its LPs will bring in the remaining,” said one of the people quoted above. Singapore-based Chandler Corporation has been investing directly and through private equity funds in markets across Asia and the West.
Homegrown investment bank Mape Advisors helped seal the deal.
“The portfolio has been purchased by Small Business Fincredit India Pvt Ltd, the company set up recently to effect this transaction,” said another person with knowledge of the development. The company will be headed by former HDFC Bank senior executive Aseem Dhru as CEO and former Kotak Mahindra Bank senior executive Mahesh Dayani as chief business officer.
“As a part of the transaction, the entire infrastructure, branches and employee team of KFSL would be transferred to SBFC. At the time of the closing of the deal, the company is expected to have a net worth of ~Rs 590 crore (net of goodwill) and loan book of ~Rs 900 crore. SBFC plans to focus the low ticket size business loans (secured by property) and loans against gold,” rating agency ICRA said.
According to ICRA, there will be an upfront equity infusion of Rs 845 crore committed by Lyra Partners and Arpwood Partners Investment Advisors LLP into the company. This equity infusion and the proposed Rs 400 crore non-convertible debentures would fund the acquisition of the ~Rs 900 crore of loan assets from KFSL.
C Parthasarathy, chairman at Karvy Group, did not respond to emailed queries. Arpwood spokesperson could not be reached for a comment despite repeated attempts. Karvy, a stock broking and financial services group, has seen some liquidity events in some of its businesses. Earlier in the year, global PE fund General Atlantic bought a controlling 74% stake in the stock broking arm, Karvy Computershare and part stake from promoter C Parathasarathy.
