Avendus plans Q3 launch for lending operations

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Mumbai: Financial services firm Avendus Capital Pvt. Ltd is preparing to launch lending operations and is in the process of hiring a seasoned banker to head them, according to two people aware of the development.

Avendus, in which private equity investor Kohlberg Kravis Roberts Co. (KKR) has a majority stake, plans to offer products such as structured credit, promoter financing and loans against shares through a non-banking financial company (NBFC) it acquired three years ago.

“Avendus and KKR are currently working on hiring the CEO for the NBFC business. They are in talks with some very senior bankers. KKR is driving the process and they are willing to pay top dollar to hire the best,” said one of the two people mentioned above, requesting anonymity as he is not authorized to speak to reporters.

“In addition to the CEO, they are looking to hire over a dozen people to set up the core team of the lending business,” he added.

Avendus declined to comment.

An email sent to KKR on Monday did not elicit a response.

The financial services firm currently operates through four verticals—Avendus Capital Pvt. Ltd, Avendus Wealth Management Pvt. Ltd, Avendus Capital (UK) Pvt. Ltd and Avendus Capital Inc. (US).

Investment banking advisory is the mainstay of the company.

According to a 25 April report in Forbes India, Avendus, which had a revenue of about Rs.200 crore in the financial year 2014-15, expects to generate around 20% of its revenue from the NBFC business by 2020.

Investment banking accounted for almost 80% of the revenue in 2014-15.

Avendus was started in 1999 by Ranu Vohra, Gaurav Deepak and Kaushal Aggarwal.

In December, KKR had announced that it was acquiring a majority stake in Avendus.

The private equity firm acquired around a 68% stake in the company for a little over $100 million, according to the 25 April Forbes India report

KKR India has both an NBFC as well as a real estate NBFC through which it offers structured loans.

Since 2008, the firm has disbursed about Rs.17,000 crore through the various credit platforms and has invested $1.4 billion through its private equity investment vehicle.

Apart from its NBFCs, in 2013, it raised an Alternative Investment Fund (AIF) of Rs.1,500 crore to offer credit solutions to Indian companies.

In September, Mint reported that KKR India was looking to raise another AIF of around Rs.1,500 crore to strengthen its credit offerings for Indian companies.

The Avendus NBFC business is expected to start operations by the third quarter of the current financial year, said the second person mentioned above.

“They are planning to invest around Rs.200-300 crore in the NBFC, which is a large chunk of KKR’s investment in the group,” he said.

Avendus will be housing the lending operations in an NBFC that it had bought in 2013.

“Avendus had been keen on entering the lending business for the last few years. They had acquired a small NBFC a few years ago as part of those plans,” the second person added.

The NBFC sector in India is seeing a surge as a number of new entrants as well as experienced banking professionals seek to tap the financial services opportunity in India.

Anshu Jain and Bhupinder Singh, former top executives at Deutsche Bank, are doing the groundwork to set up an NBFC that will be looking at lending to small and medium enterprises and will look at a largely online business model with a sparse brick-and-mortar presence, according to a report in The Economic Times on Tuesday.

Jaspal Bindra, a former chief executive of Standard Chartered’s Asia-Pacific business, took over as chairman of the Centrum Group last month.

The Centrum Group is aiming to expand its small and medium enterprises book to Rs.5,000 crore from how much,Business Standard reported on 21 April.

Pramod Bhasin and A.N. Chawla, former executives at GE Capital, had announced in March that they will acquire the financial services business of GE Capital India, with the financial backing of AION Capital Partners, an India-focused special situations fund.

Almost $5 billion has been invested by private equity and venture capital investors in the NBFC sector in the last five years, according to data from VCCEdge, the financial research platform of VCCircle.com.

Experts say areas such as lending to small and medium enterprises, housing finance and structured lending are attracting the most interest.

“Small and medium enterprises lending is growing at 20-25% a year. With all the data analytics technologies available today, small and medium enterprises have become far more credit-worthy than they were before,” said Abizer Diwanji, a partner and national leader at audit and consulting firm EY.

Given the distress in the banking system, the demand for structured credit from large and mid-sized corporate entities is only going to grow, he said. The demand for housing finance, too, is very strong, Diwanji added.