BPEA EQT, ChrysCapital buy HDFC's India education finance unit
BPEA EQT and ChrysCapital have agreed to acquire a 90% stake in India-based HDFC’s education finance business at a valuation of INR 103.5bn (USD 1.26bn). It has been described as the largest-ever private equity buyout in the country’s financial services sector.
The transaction includes INR 20bn in primary capital that will go directly to the target asset, HDFC Credila. HDFC, one of India’s largest financial conglomerates, will receive the rest of the proceeds and retain a 9.99% interest in the company, according to a filing. The deal process took just 54 days, from initiation to the signing of definitive agreements.
This is one of BPEA EQT’s biggest India deals. The firm’s acquisition of Hinduja Group’s healthcare services unit in 2021 came in at USD 1.2bn, while it paid USD 2bn for IT outsourcing player Virtusa a year earlier – but both are to some extent cross-border transactions. HDFC Credila almost certainly represents ChrysCapital’s largest transaction, although the equity split hasn’t been disclosed.
Speaking to AVCJ earlier this year after ChrysCapital closed its ninth fund on USD 1.4bn, Kunal Shroff, the firm’s managing partner, flagged an appetite for more buyouts and larger equity cheques. The first two deals in Fund IX were worth USD 593m and USD 350m, and featured LP co-investment. “We appreciate co-investors as they allow us to punch above our weight in our sectors of specialisation,” Shroff said.
Established in 2006 and headquartered in Mumbai, HDFC Credila is one of India’s leading non-bank lenders in the education finance space. The non-banking finance company (NBFC) provides loans to students pursuing higher education in India and overseas and has a loan book of more than INR 150bn.
More than 124,000 students have received loans to date, enabling them to undertake 2,700 courses across 4,100 education institutes in 59 countries. The average loan amount in 2022 was INR 2.87m.
For the 12 months ended March 2023, HDFC Credila generated INR 2.76bn in net profit, up 34% year-on-year – but this was the lowest of HDFC’s five main subsidiaries. Cumulative loans disbursed amounted to INR 244bn, 27% of the loan book was collateralised, and 0.12% of assets were classified as non-performing.
“The demand in India for obtaining a higher education is growing at a faster pace than ever, accelerated by our country’s growing middle class and students’ striving for better career opportunities,” said Jimmy Mahtani, partner and head of India at BPEA EQT.
“Coming out of HDFC Group, one of India’s most respected and well-established financial conglomerates, HDFC Credila plays a critical part in serving this demand. We have been following HDFC Credila for several years and we are excited to partner with its strong management team led by Arijit Sanyal.”
Jefferies acted as the exclusive financial advisor to HDFC Limited and HDFC Credila on the transaction, while AZB & Partners served as legal advisor. HDFC Bank was advised by Wadia Ghandy & Co.
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