The non-banking financial services arm of Religare Enterprises, owned by brothers Malvinder and Shivinder Singh, is raising Rs 300 crore in private capital, at least two sources briefed with the matter told VCCircle. Sources add that Avigo Capital Partners, a mid-market private equity firm, and an arm of the Goldman Sachs Group are in an advanced stage of discussions to invest into the financial services company.
The due diligence on the company is currently on and a deal is expected to be concluded within two-three weeks, according to the investment banking sources familiar with the matter. Avigo Capital, which typically invests in deals ranging between $10 million and $30 million, is expected to put Rs 150 crore in a co-investment deal with the rest coming from other investor(s).
"We would not like to offer a comment on this matter," said a Religare spokesperson in an e-mailed response. E-mail queries sent to the spokespersons of Goldman Sachs and Avigo did not elicit any response at the time of filing this article.
The transaction, if it materialises, can possibly be the first known financial services play for Avigo Capital that typically invests in manufacturing and engineering sectors. For Goldman Sachs, this can be the second NBFC play in India this year as it has already backed Indostar Capital Finance Ltd.
The Indian financial sector (excluding the banks) has been through a great deal of regulatory turmoil over the past 18 months, which has changed the entire sector. If the ban on entry loads was a game-changer for mutual funds in FY10, the change in ULIP guidelines and the ban on universal life products will severely affect the life insurance sector in FY11. In FY12, the NBFCs will be facing some restrictive regulations from the RBI, some of which have actually been implemented and others may be implemented in future. The stock prices of all publicly listed NBFCs have suffered badly amid this regulatory upheaval.
The most high profile PE investment in an NBFC this year has been in Indostar Capital, which raised nearly $200 million in commitments from investors like Ashmore Group Plc, Everstone Capital Management, Baer Capital and CDIB Capital besides Goldman. The company’s team includes former senior executives of Aegon India and Bank of America Merrill Lynch India, among others.
Another deal took place when private equity giant Kohlberg Kravis Roberts & Co. L.P. (KKR), along with International Finance Corporation (IFC), invested Rs 440 crore ($100 million) in Kolkata-based non-banking finance company Magma Fincorp. KKR also operates an NBFC in India that has concluded deals with Max India’s Analjit Singh, JSW’s Sajjan Jindal and the Coffee Day Group.
Also, investors like Apollo Global Management and CX Partners are looking to tap India Inc’s lending by starting special situation and mezzanine funds.