US-based Bain Capital, which has been one of the less aggressive among the bulge-bracket global private equity peers active in India but stepped up its activities over the last 12-15 months, has struck its second deal in the country in as many months and the third since January.
It has inked an agreement to pick 90% stake in Adani Capital and Adani Housing Finance, buying out the Adani family's private investments in the company. This comes just weeks after Bain Capital struck another new deal in the country in the specialty chemicals sector. Early this year Bain had also picked a stake in Embassy REIT.
Adani Capital’s Managing Director and CEO Gaurav Gupta will retain 10% ownership and continue to remain at the helm, the investor said in a statement.
“The transaction will buy out 100% of the Adani family’s private investments in the company, with Gaurav Gupta fully rolling his stake in the company and continuing to serve as Managing Director and CEO,” the global investment firm said in a statement.
Bain Capital has also committed $120 million in primary capital to facilitate the company’s ongoing growth, it said.
Further, Bain Capital is also immediately infusing debt capital worth $50 million in the form of Non-Convertible Debentures (NCDs).
“I have known Gaurav since his days as an investment banker,” said Gautam Adani, Chairman, Adani Group.
“He wanted to become an entrepreneur and I backed him. He has not only built a good financial services business with a focus on the underserved in semi-urban and rural India but has also valuably contributed to the Adani Group,” he added.
Gupta said that with Bain Capital committing Rs 1,000 crore of capital in the company, “we are now equipped to grow 4x from here.”
“Our aim has always been to support microentrepreneurs and first-time homeowners in Bharat and to be the most economical and convenient lender to our customers by leveraging technology,” he said.
Over the past few months, at least three private equity groups including Bain Capital, Carlyle, and Cerberus Capital Management had shown interest in buying Adani Capital's stake.
The transaction with Bain Capital is expected to close in the fourth quarter of this year, pending necessary regulatory and market approvals.
Avendus Capital was the exclusive financial advisor to Adani Capital, Adani Housing Finance and their shareholders in this transaction. Rothschild was the exclusive financial advisor to Bain Capital on this transaction.
The deal is expected to help Adani Group, which focuses on infrastructure but has diversified into several other unrelated businesses over the years, to deleverage the debt on its balance sheet.
Adani Capital Pvt Ltd, a subsidiary of Adani Finserve Pvt Ltd which is part of group firm Adani Enterprises Ltd, started its lending operations in April 2017 and has more than 160 branches across India providing loans for farm equiment, commercial vehicles, business loans and supply chain finance, its website says. For FY23, it had a loan book of Rs 2,690 crore and a net profit of Rs 90.7 crore. Bain Capital's investment will help position the non-bank financial company (NBFC) as a standalone company to drive expanded lending to underserved MSME (micro, small and medium enterprises), agriculture, and affordable housing segments provided by Adani Housing Finance Pvt Ltd, a subsidiary of Adani Enterprises.
The financial units were reportedly put on the block as they did not form part of the group's core businesses.
Gupta, a former Lehman Brothers and Macquarie investment banker who joined the conglomerate in 2016, last year said the non-bank lender was planning an IPO as early as 2024, selling about a 10% stake with a targeted valuation of $2 billion.
“Gaurav and the team have built a scale lending business that supports entrepreneurialism and is trying to solve the $300 billion+ unmet retail MSME credit demand in the country. The company has strong business fundamentals, an experienced team, with ability to serve and expand to core segments like agriculture, housing and to underbanked rural areas,” said Rishi Mandawat, a Partner at Bain Capital.
In India, Bain Capital’s investments include Axis Bank, in which it recently trimmed minority ownership, 360One (previously known as IIFL Wealth), L&T Finance Holdings, QuEST Global Services and Emcure Pharma. Over the last 2-3 years it has also invested in JM Baxi Ports & Logistics and CitiusTech Healthcare.
Globally, the investor is also reported to be raising $4 billion for a new "special situations fund" and nearing the final close of its fifth and biggest Asia-focused fund after having raised around $6 billion from global investors.
