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Au Financiers to sell housing finance arm to Kedaara and Partners Group JV

12 February, 2016

Au Financiers (India) Ltd said on Friday it has agreed to sell its housing finance arm to a joint venture of local private equity firm Kedaara Capital and Swiss investment firm Partners Group.

The Jaipur-based non-banking finance company didn’t give any financial details of the transaction in a stock-exchange filing.

Emails sent to Kedaara Capital, Partners Group and Au Housing for details of the deal didn’t immediately elicit any response.

While Au Financiers is privately held, its AU Housing Finance Ltd unit has listed debt securities.

The move from Au Financiers, one of 10 firms to get in-principle nod last year from the Reserve Bank of India to start a small finance bank, will help the company to expand its capital base.

Kedaara Capital had invested in Au Financiers in December 2014. The PE firm’s debut deal was an investment of Rs 200 crore in Mahindra Logistics Ltd in April 2014. It invested an equal amount in Parksons Packaging Ltd in March 2015. Kedaara also has an exposure to auto-parts maker Bill Forge Pvt Ltd and Manjushree Technopack Ltd.

Partners Group set up its India office in 2014 and has been looking to ramp up its investments in the country.

Initially, Partners Group was a limited partner, or an investor, in other PE funds in India. In 2013, however, it struck a control deal when it acquired a majority stake in CSS Corp for $270 million. The deal for Au Housing is another control transaction where Partners Group is directly involved. It isn’t clear if Partners Group is a limited partner in Kedaara.

Au Housing, which has a loan book of Rs 1,500 crore, reported a 165 per cent jump in profit after tax to Rs 19.08 crore in 2014-15. The firm has 623 employees and serves about 14,000 customers.

The Economic Times earlier in the day reported that the deal was worth Rs 950 crore (around $138.9 million) with Au Financiers being advised by Axis Capital on the transaction. Au Financiers managing director Sanjay Agarwal told the newspaper that the sale would double the share capital of the parent company from Rs 1,000 crore currently.

The newspaper had a week ago cited unnamed sources as saying that Everstone-backed Indostar and private equity fund Multiples were also in the race to acquire Au Housing Finance.

The move from Kedaara and Partners Group comes at a time when the housing finance sector is getting a lot of attention from PE investors. Given the focus of the government towards housing for all by 2022, the sector may see a lot of traction in coming years.

Temasek-controlled NBFC Fullerton India Credit Company last week announced launching of a housing finance subsidiary, Fullerton India Home Finance, while Carlyle in its deal with Destimoney Enterprises Pvt Ltd had acquired a 49 per cent stake in PNB Housing last year .

While the latest deal will help Au Financiers to augment its capital base, it would still need a plan to bring its foreign shareholding down to 49 per cent to comply with RBI norms to start a small finance bank. The firm, which was incorporated in 2011, currently has 62 per cent foreign holding with a majority being held by Warburg Pincus, International Finance Corporation and ChrysCapital.

Earlier this week, Disha Microfin, another firm with in-principle approval for a small finance bank, announced plans to raise Rs 300 crore ($44 million) from domestic and foreign investors to bring down foreign shareholding. Microlenders Ujjivan and Equitas have already filed for IPOs to bring down foreign shareholding before they start small finance banks.


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Au Financiers to sell housing finance arm to Kedaara and Partners Group JV

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