Education-Driven Avanse Financial Targets ₹3,500 Crore IPO

IPO

Avanse Financial Services Limited, an education-focused non-banking financial company (NBFC) backed by Warburg Pincus, has filed a draft red herring prospectus (DRHP) with the Securities and Exchange Board of India (SEBI) to raise ₹3,500 crore through an initial public offering (IPO). The IPO will consist of a fresh issue of equity shares worth up to ₹1,000 crore and an offer for sale (OFS) of up to ₹2,500 crore by existing shareholders.

Under the OFS segment, shares worth up to ₹1,758 crore will be sold by Olive Vine Investment Ltd, a promoter entity; up to ₹342 crore by International Finance Corporation (IFC); and up to ₹400 crore by Kedaara Capital Growth Fund III LLP. Olive Vine Investment, an affiliate of Warburg Pincus, holds a 58.38% stake in Avanse, while IFC and Kedaara Capital own 11.36% and 13.82%, respectively.

Avanse, established in 2013, is a rapidly growing NBFC that provides personalised education financing solutions to Indian students. The company aims to democratise education and financing in India, offering solutions to education aspirants and meeting educational institutions’ growth and working capital needs.

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According to a CRISIL report, as of March 31, 2024, Avanse is the second-largest education-focused NBFC in India by assets under management (AUM). The company’s AUM increased 2.75 times from ₹4,835.6 crore in March 2022 to ₹13,303 crore in March 2024, representing a compound annual growth rate (CAGR) of 65.86%. During the same period, loan disbursements grew from ₹2,928.5 crore in FY22 to ₹6,335 crore in FY24, at a CAGR of 47.07%.

The company reported a net profit of ₹342 crores for the financial year ended March 31, 2024, more than doubling from ₹158 crores in FY23 and increasing over 5.42 times from ₹63.2 crores in FY22. Revenue from operations grew to ₹1,727 crore in FY24 from ₹990 crore in FY23.

As of March 31, 2024, Avanse’s total borrowings, including debt securities, other borrowings, and subordinated liabilities, stood at ₹10,135 crore, compared to ₹7,210 crore in FY23. The company maintained a healthy return on equity (ROE) of 12.81% and a return on assets (ROA) of 2.83% in FY24.

The education loan sector was noted for its best asset quality and lowest gross non-performing assets (GNPA) across NBFC asset classes, and it saw substantial growth. According to CRISIL, education loans grew from an AUM of ₹7,500 crore in FY19 to an estimated ₹41,800 crore in FY24, with a CAGR of 41.1% between FY19 and FY24 and 65% between FY21 and FY24.

The book-running lead managers for Avanse’s IPO include Kotak Mahindra Capital Company Limited, Avendus Capital Private Limited, J.P. Morgan India Private Limited, Nomura Financial Advisory and Securities (India) Private Limited, Nuvama Wealth Management Limited (formerly known as Edelweiss Securities Limited), and SBI Capital Markets Limited.

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