PE-backed NBFC Indostar files for India IPO

According to a prospectus, the offering will consist of an undisclosed amount of new shares for up to INR7 billion ($109 million), along with up to 20 million shares held by investors including promoter entity Indostar Capital. Pricing has not been announced.

Indostar Capital, which holds a 90.4% stake in ICF, is majority-owned by Everstone, with additional private equity backers including CDIB Capital and Beacon Private Equity. Everstone holds about 1.1 million shares directly in ICF, a 1.4% stake, which it will not sell in the offering.

ICF will use the proceeds of the fresh issue to augment its capital to risk assets ratio (CRAR). Currently, the NBFC’s CRAR stands at 36.1%, well above the regulatory minimum of 15%, but the company intends to raise its reserves to prepare for the possibility that the Reserve Bank of India (RBI) will raise capital adequacy requirements in the future.

ICF’s primary business is providing structured financing solutions to Indian corporate customers and small and medium-sized enterprises (SMEs). It recently added vehicle and housing finance products as well. So far these products’ share of its total credit exposure is negligible compared with corporate and SME lending, which stood at 78.6% and 21.4% of its INR45 billion ($701 million) loan book as of September 2017 respectively.

Since its founding in 2011 ICF has disbursed INR211 billion, of which INR166 billion has been repaid. As of March 2017, the company’s gross non-performing assets (NPA) ratio stood at 1.4%, up from 0.2% the year before. Over the same period, revenue grew from INR6.4 billion to INR7.2 billion, while net profit rose from INR1.9 billion to INR2.1 billion.

ICF was the brainchild of Everstone, which decided to enter India’s $750 billion credit market in 2010 after the retreat of the global investment banks that had previously dominated it in light of the global financial crisis. The firm decided to found its own NBFC rather than buy into an existing company, which would mean paying a significant premium to book value.

It arranged initial capital infusions from CDIB and Beacon, along with Goldman Sachs and specialist emerging markets investor Ashmore Group.

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• Topics
• South Asia
• Financials
• IPO
• India
• NBFCs
• Everstone Capital
• CDIB Capital
• Beacon Private Equity
• Financial Services