Fidelity, East Bridge among IndoStar Capital’s anchor investors
Photo Credit: Shah Junaid/VCCircle

Non-banking finance company IndoStar Capital Finance Ltd has raised Rs 553.20 crore ($82.44 million) by allotting shares to anchor investors, which include investment firms East Bridge Capital and Fidelity, ahead of its initial public offering.

Mumbai-based IndoStar, which is backed by private equity firm Everstone Capital, allotted 9.67 million shares at the upper end of the Rs 570-572 price band to 24 anchor investors.

East Bridge acquired 2.62 lakh shares worth Rs 15 crore. Fidelity subscribed to 6.11 lakh shares worth Rs 35 crore, as per the stock-exchange filing.

Other foreign institutions that took part in the allotment were hedge fund managers Ward Ferry and Aurigin Capital Management, BNP Paribas, Myriad Asset Management and Jupiter South Asia Investment Co.

Domestic investors included Reliance Capital’s principal investment firm, Reliance Strategic Investments Ltd, and Edelweiss’ alternative investment fund.

A handful of Indian asset managers such as HDFC Trustee Co, Reliance Trustee Co, SBI Mutual Fund, Sundaram Mutual Fund as well as insurers ICICI Lombard General Insurance Co, Max Life Insurance Co and Bajaj Allianz Life Insurance Co. were the other investors.

Anchor investors are institutional investors who accept a one-month lock-in period for a sizeable allocation of shares and support a public offering. Their participation highlights investors’ confidence in an IPO and sets a benchmark for the investor community at large.

The IPO, which kicks off on Wednesday and closes three days later, will see promoters and co-investors make a partial exit. The offering is a combination of fresh shares as well as a secondary sale of shares.

IndoStar is seeking Rs 5,213.14 crore ($781.93 million) in valuation through the IPO. The company will issue fresh shares worth Rs 700 crore, besides a secondary sale of 20 million shares by the promoter and other shareholders.

The company had filed its draft proposal with the Securities and Exchange Board of India (SEBI) on 9 February. It received the regulatory nod on 3 April.

IndoStar had earlier deferred its plan to go public as it was looking to expand its consumer lending portfolio through acquisitions.

VCCircle had first reported in November that the company was reviving plans to go public ahead of a proposed acquisition of ICICI Home Finance. The deal to buy ICICI Bank’s mortgage unit was subsequently called off. IndoStar Capital CEO R Sridhar later explained that there was a “problem of alignment of objectives”.

IndoStar Capital

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.

Everstone holds a 49.4% stake in IndoStar Capital Mauritius while Goldman Sachs owns 18.8%. Its other major shareholders are 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 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.

The company operates four principal lines of business, namely corporate lending, small- and medium enterprise (SME) lending, vehicle financing and housing financing.

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% in the same period.

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