India's True North to buy stake in Federal Bank NBFC
True North has agreed to buy a 26% stake in Fedbank Financial Services (Fedfina), a non-banking financial company (NBFC) controlled by India’s Federal Bank.
The private equity firm will acquire newly issued shares in Fedfina for an undisclosed sum, according to a filing. Local media reported last year that Federal Bank was looking to raise INR3-4 billion ($45-60 million) through the sale.
The investment is intended to help Fedfina strengthen its capital base and grow its branch network. The NBFC started out in 2010 as a distribution arm for its parent bank, selling home loan and auto loan products through around 10 outlets. It now has 110 fully-fledged retail branches across three states, as well as a presence in smaller cities and towns. It claims to have worked with 30,000 families.
Fedfina built its business on loans made against gold, but it has since entered other market segments such as mortgages and construction financing. As of March 2017, the company’s loan portfolio was worth INR9.62 billion, up from INR6.11 billion the previous year. Over the same period, net profit rose from INR122.5 million to INR225.3 million.
NBFCs are a popular target among private equity investors, with some firms going as far as to establish their own NBFCs to provide structured financing and lending services to businesses and individuals that are overlooked by traditional banks. Lone Star Funds joined this category in April, announcing plans for an NBFC with RattanIndia Group. A month earlier, PE-backed Indostar Capital Finance filed for an IPO.
Recent direct investment activity includes ChrysCapital leading a INR3.5 billion Series C round for Varthana, which provides debt financing to schools and Accel Partners and Elevar Equity participating in a INR1.5 billion investment in Samunnati. True North has previously backed agriculture-focused NBFC Magma Fincorp and small finance bank Fincare.
The private equity firm – which used to be known as India Value Fund Advisors – is currently raising its sixth fund. The vehicle launched last year with a hard cap of $1.1 billion but AVCJ understands the target has been revised to below $1 billion.
More on South Asia
Latest News
Asian GPs slow implementation of ESG policies - survey
Asia-based private equity firms are assigning more dedicated resources to environment, social, and governance (ESG) programmes, but policy changes have slowed in the past 12 months, in part due to concerns raised internally and by LPs, according to a...
Singapore fintech start-up LXA gets $10m seed round
New Enterprise Associates (NEA) has led a USD 10m seed round for Singapore’s LXA, a financial technology start-up launched by a former Asia senior executive at The Blackstone Group.
India's InCred announces $60m round, claims unicorn status
Indian non-bank lender InCred Financial Services said it has received INR 5bn (USD 60m) at a valuation of at least USD 1bn from unnamed investors including “a global private equity fund.”
Insight leads $50m round for Australia's Roller
Insight Partners has led a USD 50m round for Australia’s Roller, a venue management software provider specializing in family fun parks.