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Kedaara Capital buys a stake in Jaipur-based NBFC AU Financiers

Private equity firm Kedaara Capital has struck its second investment by picking a minority stake in Rajasthan-based non-banking finance company Au Financiers (India) Ltd for an undisclosed amount, according to a press release. The investment also marks the entry of Kedaara Capital in the financial services sector of India.

VCCircle had first reported that Kedaara is in talks to buy a stake in AU Financiers from its existing investor Motilal Oswal PE.

The deal structure and the value have not been disclosed by the company. Separate emailed queries to Kedaara Capital and AU Financiers seeking further details on the deal did not elicit any response by the time of filing this article.

AU Financiers, with assets under management of over Rs 5,000 crore, lends to small and medium enterprises apart from giving commercial vehicle and home-loans, and operates through over 225 branches in western India.

Founded in 1996 by a first-generation entrepreneur, Sanjay Agarwal, in Jaipur, it operates across contiguous semi-urban and rural regions in North, West and Central India. It has grown across three segments—commercial vehicles, affordable housing and micro/small enterprises.

“We are pleased to be partnering with Au Financiers, a company led by enterprising promoters who have built a robust platform of sound risk management and credit underwriting capabilities. We believe that our partnership will help propel growth in the under-served rural and semi-urban segments by promoting consumer credit, agriculture lending and corporate lending to small and micro enterprises,” Nishant Sharma, managing director, Kedaara Capital, said.

In April, Kedaara Capital had inked its debut deal by picking a minority stake in Mahindra Logistics, part of the multi-billion dollar Mahindra Group, for around Rs 200 crore.

“Over the years, Au Financiers has made access to affordable credit a reality for underserved individuals and MSMEs, who were otherwise exploited by informal lending channels. We are delighted to have Kedaara on board with us, who share the same vision of broader financial inclusion in the country. Their unique operating partner model will add significant value to us as we seek to develop into one of India’s most preferred financial institution,” Sanjay Agarwal, managing director of Au Financiers, said in the statement.

Motilal Oswal had acquired a 35 per cent equity stake in AU Financiers in two tranches between 2008 and 2010 for around Rs 40 crore, and was reportedly looking to exit the Jaipur-headquartered company.

In February last year, ChrysCapital bought 10 per cent stake in AU Financiers for Rs 120 crore ($22 million) through secondary purchase of shares from early PE investor Motilal Oswal PE and the promoters. Later, IFC and Warburg Pincus acquired 18 per cent and 26 per cent in the company, respectively.

In April this year, the NBFC raised $21 million (around Rs 126 crore) in its fourth round of fundraising through preferential allotment to existing shareholders, including the promoters.

The company is looking to expand to other parts of the country and expects its loan book to soon hit the $1 billion milestone.

(Edited by Joby Puthuparampil Johnson)

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