IFC proposes $40m investment in India's Aavas Financiers
The International Finance Corporation (IFC) is considering an investment of up to $40 million in debt in Aavas Financiers, a housing finance business that Partners Group and Kedaara Capital bought last year from non-banking financial company (NBFC) Au Financiers.
IFC will invest through non-convertible debentures with a seven-year term, according to a disclosure. Until now the company has only been able to raise debt with a term of up to five years, mostly from banks. IFC expects its commitment to help Aavas diversify its funding profile and improve its financing terms.
Aavas provides loans to low and medium income individuals across six states in India for home purchases, construction and improvements. Most of its customers are self-employed and face difficulty obtaining credit because of higher perceived risk.
The company was founded in 2011 as Au Housing Finance, aiming at serving the housing needs of people living in India’s rural and semi-urban areas. Partners Group and Kedaara acquired the unit last year for a reported INR9.5 billion ($139 million) in a sale aimed at providing the parent with additional capital to support its bid to open a small finance bank.
IFC and Kedaara are shareholders in Au Financiers as well, in addition to Warburg Pincus and ChrysCapital Partners. The NBFC’s PE backers plan to part-exit their stakes in the company in its proposed IPO.
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