MUMBAI: Abu Dhabi’s Mubadala Investment Co., Kotak Pre-IPO Opportunities Fund and Avendus Future Leaders Fund are set to deploy ₹1,100 crore of primary capital in Warburg Pincus-backed Avanse Financial Services, said people aware of the development. The proposed deal will value the Warburg Pincus-owned non-banking finance company (NBFC) at ₹8,000 crore, underscoring the rising interest of alternative asset managers in the space. Earlier this year, BPEA EQT (formerly Baring PE Asia) announced the biggest trade in the sector–the buyout of HDFC Credila.
Avanse is the second-largest domestic private sector NBFC in the education loan segment with assets under management (AUM) of ₹8,646 crore in FY23. The firm’s total disbursements in FY23 stood at ₹6,143 crore, more than double that in FY22. The company has disbursed loans to over 350,000 students and provided working capital to 1,200 institutions. It has financed 400,000 students at 4,000 institutes for 30,000 courses in 50 countries. It has also provided growth and working capital to 2,000 educational institutes.
The company plans to go public this year to raise around ₹4,000 crore and has been in discussions with investment bankers. If the plans of Avanse fructify, it would arguably be the first-ever listing by an education-focused NBFC in India.
US private equity firm Warburg Pincus acquired about 80% stake in Avanse Financial Services, the education finance arm owned by Wadhawan Global Capital, in 2019. The rest of the stake in Avanse is held by Kedaara Capital (12.4%) and World Bank arm IFC.
HDFC Credila is the largest education loan provider with AUM of ₹15,298 crore on March 31, 2023.
Spokespersons of Avanse and Avendus declined to comment. Warburg Pincus, Mubadala and Kotak didn’t respond to queries.
Avanse Financial’s education loan portfolio was ₹6,068 crore (70% of AUM) on March 31, 2023. The company extends loans mainly for overseas studies in around 50 countries. Courses in the US account for 52.7% of such loans followed by Canada (18.6%), UK (17.5%), India (5.6%) and others (5.6%).
Education Institution Loans (EIL) constituted 17.5% of the portfolio on March 31, 2023. This goes toward financing working capital as well as the growth capital needs of educational institutions in India. The digital business accounts for 9%. This has an active customer base of more than 150,000 students catering to upskilling and test preparation, according to a CARE Ratings report.
In 2023, the education financing sector enjoyed exceptional growth. As per a CRIF report, the student loan market was worth ₹1.36 lakh crore in March 2023, up 23% from the previous year. PSU banks hold the lion’s share of such loans. However, the NBFC segment is gaining. As of March 2023, it was at 18.39% of the market versus 12.60% in March 2022, a year-on-year growth of 80%.
Source: The Economic Times
