Everstone-backed IndoStar Capital gets SEBI nod to float IPO
Photo Credit: Shah Junaid/VCCircle

Non-banking finance company IndoStar Capital Finance Ltd has received regulatory approval to float an initial public offering.

The NBFC, which his backed by private equity firm Everstone Capital, received the nod from the Securities and Exchange Board of India on 3 April.

IndoStar had filed its draft prospectus with SEBI on 9 February.

The IPO will comprise fresh issue of shares worth Rs 700 crore. Separately, there will be an offer for sale by Everstone and its limited partners, who own a majority stake in the company. Other individual investors will also sell a small chunk of shares during the IPO.

The total IPO size is estimated at Rs 1,300-1,400 crore ($202-218 million), two people familiar with the development told VCCircle.

In November, VCCircle had first reported that the company was reviving its plans to go public ahead of the proposed acquisition of ICICI Home Finance. The deal to buy ICICI Bank’s mortgage unit was subsequently called off.

IndoStar Capital’s chief executive officer R Sridhar later explained that there was a “problem of alignment of objectives”.

In December, merchant bankers had been appointed for the IPO.

In July last year, IndoStar had deferred its plan for an IPO as it was scouting for acquisitions to expand its consumer lending portfolio.

The planned acquisition of ICICI Home Finance was seen as a precursor to the proposed IPO because there was higher investor interest for retail financial assets during a public issue. At the same time, IndoStar also established a retail mortgage finance business through IndoStar Home Finance to grow the book from the ground up.

JM Financial, Kotak Mahindra Capital, Morgan Stanley India, Motilal Oswal Investment Advisors, Nomura Financial Advisory and Securities India have been appointed as the merchant bankers for the issue.

The company aims to utilise the net fresh proceeds to augment its capital base for future requirements. The proceeds from the offer for sale will go to the respective selling shareholders. The company will not receive any proceeds from the secondary sale.

The NBFC was established in 2009 as RV Vyapaar Pvt. Ltd. It was renamed as IndoStar in 2014. The company is 90.74% owned by IndoStar Capital Mauritius as of 31 March 2017, according to a June credit report by Care Ratings.

It operates four principal lines of business – corporate lending, small- and medium enterprise lending, vehicle finance and housing finance.

Everstone holds a 49.4% stake in IndoStar Capital Mauritius, while Goldman Sachs owns 18.8%. Its other major shareholders include ACIP Investments with a 16.4% stake, Baer Capital Partners with 10.8% and CDIB Capital International, the PE arm of China Development Financial, with 4.7%. One of its previous investors was Ashmore Group Plc, which had sold its stake to Everstone and ACIP in 2014-15.

IndoStar had assets of Rs 5,222 crore as of March 2017 and is building on its next set of growth vectors, utilising its structured debt expertise to serve smaller businesses, according to the company’s website.

Around 86% of its portfolio was in wholesale lending, divided almost equally between real estate and non-real estate segments. The other category includes loans against property to small and medium enterprises.

Corporate lending accounted for 78.6% of its total credit exposure for the six months ended September 2017, while its SME lending accounted for 21.4% during the same period.

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