Avanse Financial Services Limited: With its primary office located in Mumbai and backing from Warburg Pincus, Kedaara Capital, and IFC, Avanse Financial Services has submitted draft documents to SEBI in an attempt to earn ₹3,500 crore via an initial public offering (IPO). With this possible listing, India’s first non-banking financial company (NBFC) with an emphasis on education would make its stock exchange debut.
IPO Details
- Total Issue Size: ₹3,500 Crore
- Fresh Issue: ₹1,000 Crore
- Offer for Sale (OFS): ₹2,500 Crore by Warburg Pincus, Kedaara Capital, and IFC
According to the draft red herring prospectus (DRHP), the proceeds from the IPO will primarily enhance Avanse’s capital base, supporting future business and asset growth.
Investment Banks Involved
- Kotak Mahindra Capital
- Nomura
- JP Morgan
- Avendus Capital
- Nuvama
- SBI Capital
Background and Financials
Warburg Pincus acquired an 80% stake in Avanse Financial Services from Wadhawan Global Capital group in March 2019. IFC has been a stakeholder since 2013, and Kedaara Capital invested ₹800 crore in January 2023.
Avanse provides loans across three segments: student loans, loans for professionals, and institutional loans. As of March 31, 2024, it ranks as India’s second-largest education-focused NBFC by assets under management (AUM). In FY2024, it also recorded the second-highest disbursements and profit after tax among its peers.
Financial Growth
- AUM Growth: Increased from ₹4,835.6 Crore (March 31, 2022) to ₹13,303 Crore (March 31, 2024), with a CAGR of 65.86%.
- Total Income:
- FY2022: ₹508.5 Crore
- FY2023: ₹990 Crore
- FY2024: ₹1,729 Crore
- Net Profit:
- FY2022: ₹63.2 Crore
- FY2023: ₹158 Crore
- FY2024: ₹342
Avanse Financial Services Limited, a domestic non-banking financial company with an emphasis on education, has submitted a draft red herring prospectus (DRHP) to SEBI in an attempt to earn ₹3,500 crore via an IPO.
The IPO, supported by international private equity company Warburg Pincus, consists of an offer for sale (OFS) by current shareholders of up to ₹2,500 crore and a new issue of equity shares totaling ₹1,000 crore. The face value of each share is ₹5.
The OFS component involves proposals to sell shares worth up to ₹1,758 crore by Olive Vine Investment Ltd, a promoter entity; up to ₹342 crore by International Finance Corporation (IFC); and up to ₹400 crore by Kedaara Capital Growth Fund III LLP. With a current ownership of 58.38%, Olive Vine Investment, a Warburg Pincus affiliate, is the largest shareholder in the company, followed by IFC (11.36%) and Kedaara Capital (13.82%).
In order to meet future capital requirements brought on by business and asset growth efforts, Avanse will strengthen its capital base with the money acquired through the issuing of new equity.
Avanse Financial Services Limited was founded
Avanse is a fast growing non-banking financial firm (NBFC) with a focus on education that was founded in 2013 and provides Indian students with specialized financing options. By fostering educational goals and addressing the expansion and working finance requirements of educational institutions all around the nation, the organization hopes to democratize education and its financing in India.
Avanse’s draft red herring prospectus (DRHP) cites a CRISIL assessment that places the company as the second largest education-focused nonbank financial institution (NBFC) in India by assets under management (AUM) as of March 31, 2024. Since March 31, 2022, the company’s AUM has increased 2.75 times, to ₹13,303 crore, at a compound annual growth rate (CAGR) of 65.86%. Disbursements grew at a CAGR of 47.07% throughout the same period, rising 2.16 times to ₹6,335 crore in FY2024 from ₹2,928.5 crore in FY2022.
Since its founding, Avanse has disbursed loans under its student loan – international business totaling ₹12,365.5 crore as of March 31, 2024. With an average loan size of ₹1.39 crore, the educational institution loan segment had an AUM of ₹2,266.28 crore, or 17.04% of the total AUM.
Avanse’s fiscal year ended March 31, 2024, saw a net profit of ₹342 crore, more than doubling from ₹158 crore in FY2023 and greatly expanding from ₹63.2 crore in FY2022, by over 5.42 times. As of March 31, 2023, the company’s operating revenue has increased to ₹1,727 crore from ₹990 crore.
Avanse Financial Services reported total borrowings of ₹10,135 crore as of March 31, 2024, which includes borrowings (excluding debt instruments) and subordinated liabilities. This is an increase from ₹7,210 crore in FY23. In FY2024, the company’s return on assets (ROA) of 2.83% and return on equity (ROE) of 12.81% were both impressive.
Education loans had the lowest gross non-performing assets (GNPA) of all NBFC asset classes, indicating superior asset quality. Their assets under management (AUM) increased from ₹7,500 crore in FY19 to ₹9,000 crore in FY21 and an expected ₹41,800 crore in FY24, according to a CRISIL research. With this increase, the compound annual growth rate (CAGR) for FY19 and FY24 is 41.1% and for FY21 and FY24, it is 65%.
Serving as the Book Running Lead Managers for the issue are Kotak Mahindra Capital Company Limited, Avendus Capital Private Limited, J.P. Morgan India Private Limited, Nomura Financial Advisory and Securities (India) Private Limited, Nuvama Wealth Management Limited (formerly known as Edelweiss Securities Limited), and SBI Capital Markets Limited.
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