Temasek buying Silicon Valley Bank’s Indian venture debt arm for $45M

Singapore's state-owned investment firm Temasek is acquiring NASDAQ-listed diversified financial services company SVB Financial Group's specialty finance business focused on venture debt in India for Rs 280 crore (around $45 million), as per a regulatory disclosure.

Temasek has signed a share purchase agreement with Silicon Valley Bank, a wholly-owned subsidiary of SVB Financial Group, and some of its subsidiaries to acquire 100 per cent stake in its subsidiary SVB India Finance Private Limited.

The transaction, which is subject to certain customary closing conditions, including regulatory approval by the RBI, is expected to be closed in the current quarter.

Based on the transaction, SVB Financial is expected to include a loss of approximately $11.4 million in its fourth quarter results, on a post-tax basis, it said. Additionally, the company is expected to incur another transaction-related expenses of approximately $1 million, on a pre-tax basis in the first quarter of 2015.

The stake sale in Mumbai-based SVB India is part of SVB Financial's efforts to focus on other strategic areas of business and growth initiative priorities, it said in a statement.

SVB started venture lending operation in India by creating SVB India Finance Pvt. Ltd in 2008. It provides debt capital to domestic, venture-backed, early and mid-stage companies in India. It had then roped in Ajay Hattangdi, who was leading Citigroup’s venture lending operations in India, as the chief of the venture debt business in the country. It provides collateral free loans of up to Rs 15 crore for a term of six months to three years.

It has invested in firms like Snapdeal, iYogi, BlueStone, Capillary, CarWale, FirstCry, Faaso's, Freecharge and Perfint.

SVB as a group also has exposure to India through its venture capital arm, SVB India Capital Partners, where it has made co-investments in companies with other funds. It has invested in various companies such as One97 Communications, iYogi, Geodesic Techniques, Genesis Colors, etc.

SVB group also operates a cross-border consulting arm, SVB India Advisors Pvt. Ltd.

It said that this transaction would mean it would disassociate itself from making debt deals in India.

An email query to SVB for more details on its future strategy from the equity investment side and the reason for selling the venture debt business did not immediately elicit a response.

For Temasek, this would expand its existing debt business in India where its wholly owned arm Fullerton India Credit Company Ltd (FICCL) is already present as an NBFC. Indeed, FICCL is one of the largest foreign controlled NBFCs in India. Mumbai-based FICCL largely focuses on SME lending.

It, however, could not be ascertained whether SVB India will be integrated with FICCL, once the transaction is completed, or would continue to be led by an independent team.

Acquisition of a venture debt business would add another layer to Temasek's credit business in India and expand its exposure to the early stage investment space. Already its venture investment arm Vertex had built a small portfolio backing firms such as FirstCry, among others.

Temasek, on the other hand, focuses on larger size investment both as a portfolio investor in the public markets domain and through private equity style transactions in the private company space.

Temasek spokesperson declined to share further information on its India plans with this acquisition.

This would be its second back-to-back India related deal this week after sealing a almost 18 per cent stake purchase in hospital firm Medanta from Punj Lloyd in a deal estimated to be worth over $100 million. Last year it had done some half a dozen deals in India.

(Edited by Joby Puthuparampil Johnson)

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