Mubadala, Kotak, Avendus To Infuse INR 1,100 Cr Into Avanse

Abu Dhabi’s Mubadala Investment Co, Kotak Pre-IPO Opportunities Fund and Avendus Future Leaders Fund will be reportedly deploying INR 1,100 Cr ($132.7 Mn) of primary capital into Avanse Financial Services.

As per ET’s report, the proposed deal will value the Warburg Pincus-owned NBFC at INR 8,000 Cr, reflecting increased interest from alternative asset managers in the sector.

Earlier this year, EQT (Baring PE Asia-EQT) made a significant acquisition by buying HDFC Ltd’s education loans arm.

Avanse is the second-largest domestic private sector non-banking financial company (NBFC) in the education loan segment. 

Founded in 2012, Avanse offers credit for post-graduate students and academic institutions. It claims to have an asset under management (AUM) at nearly INR 8,000 Cr as of December 2022 and also reported a 1.9x growth over the same period 2022 fiscal year. 

In the first nine months of FY2023, its loan disbursement stood at about INR 4,850 Cr, growing by nearly 2.5X in the same period last fiscal year.

Avanse has financed over 4 lakh students across 4,000 institutes and 30,000 courses in 50 countries.

The company is in talks with investment bankers as it aims to go public this year, with plans to raise approximately INR 4,000 Cr. If Avanse’s plans materialise, it would potentially mark the first-ever listing by an education-focused NBFC in India.

In 2019, Warburg Pincus acquired an 80% stake in Avanse Financial Services, the education finance arm of Wadhawan Global Capital. The remaining ownership includes Kedaara Capital (12.4%) and IFC, a World Bank arm. 

As of March 31, 2023, HDFC Credila leads as the largest education loan provider with an AUM of INR 15,298 Cr.

Avanse Financial’s education loan portfolio was INR 6,068 Cr (70% of AUM) on March 31, 2023. The company extends loans mainly for overseas studies in around 50 countries. Courses in the US account for 52.7% of such loans followed by Canada (18.6%), UK (17.5%), India (5.6%) and others (5.6%).

In India, it competes against the likes of Eduvanz, Propelld and Leap Finance, among others.

In just two years (between September 2020 and September 2022), NBFCs almost doubled their market share in retail education loans to 18.6%, as per a report by CARE ratings. 

The report, dated February 2023, reads that NBFCs have focussed on building expertise in the retail education loans segment with well-defined sourcing channels, including educational consultants, digital marketing, and direct walk-ins at branches. 

According to an Inc42 report, the country’s fintech sector is projected to become $1.3 Tn by 2025, growing at a CAGR of 31% during 2021-2025.