Everstone to invest $33m in Indian NBFC
Everstone Capital is to invest INR2 billion ($33.5 million) for a 15-20% stake in Hinduja Leyland Finance (HLF) a non-banking financial company (NBFC) owned by the Hinduja Group.
The NBFC is a commercial vehicle financier and jointly owned by Hinduja Group's flagship entity, Ashok Leyland (ALL) - India's second-largest manufacturer in the medium and heavy commercial vehicles segment - and other entities of the Hinduja Group.
HLF provides financing to small business and entrepreneurs to acquire a range of utility and other commercial vehicles, focusing on the semi-urban and rural sector. It has current assets under management in excess of INR40 billion and more than 180,000 customers.
The company reported a profit of INR920 million for the year ended March 2013, up 12% year-on-year.
The investment comes after ALL's sales volume has dropped by around 13% during 2012-13 as demand for medium and heavy commercial vehicles industry slowed. However, according to credit rating agency ICRA, net profits were boosted by around INR2.9 billion worth of divestments of group entities - Hinduja Leyland Finance and IndusInd Bank.
Dhanpal Jhaveri, partner and CEO at Everstone, told AVCJ that HLF has built a strong front end in terms of origination capability to reach out to customers and work with them.
"In the short run all businesses will face some impact from the slowing down of the economy but HLF in particular has broad-based its business across India and reaches out to customers that have nothing to do with ALL," he said.
Jhaveri added that financial services are a catalyst for long-term growth opportunities in India. Everstone has invested in another NBFC, IndoStar Capital, from the same fund - the $580 million Everstone Capital Partners II which closed in March 2011.
IndoStar was a start-up created in conjunction with LPs and focuses on wholesale secured lending for corporates. Goldman Sachs, Ashmore Group and CDIB Capital have also invested in the financier.
The NBFC space is popular among private equity investors: KKR set up its own NBFC in 2009 and last year Warburg Pincus acquired a 68.3% stake in Future Capital from Pantaloon Retail across two transactions for INR7.4 billion.
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