Wednesday, June 23

TPG Growth invests $42 million in Ess Kay Fincorp

TPG Growth, the middle market and growth investment fund of TPG Group, today announced that it has invested $42 million in Ess Kay Fincorp, a Jaipur-based NBFC. Existing investors Norwest Venture Partners and Evolvence India Fund II Ltd are investing alongside TPG Growth, the fund said in a joint statement.

ET was the first to report the proposed transaction in its October 12 edition.

Founded in 1994 by Rajendra Setia, Ess Kay essentially targets rural and semi-urban customers to help them buy used vehicles including commercial vehicle, car, agricultural equipment, two and three-wheeler and MSME loans for small businesses. The company operates in the states of Rajasthan, Gujarat, Madhya Pradesh, Maharashtra, Punjab and Haryana, servicing mostly low-income, self-employed individuals.

“With its differentiated business model supported by a direct sourcing network, hands-on approach to underwriting, quick turnaround and robust collection mechanism, Ess Kay Fincorp has demonstrated a unique advantage and opportunity in a difficult to serve category,” said Gaurav Trehan, Partner at TPG.

“Traditional underwriting methods in India exclude majority of creditworthy individuals and SMEs. Our long-standing and partnership driven approach in our focus geographies has led us to establish a business model that directly addresses the needs of our customers,” said Rajendra Setia, Founder and Managing Director, Ess Kay Fincorp.

The company’s loan book at the end of March 31, 2018 stood at Rs 1282 crore with a gross NPA margin of around 3.37%. As on date, the company’s branch network stands at 240 branches. The average ticket size for vehicles is Rs 3 lakh over an average tenure of three years, and Rs 7 lakh for five-year SME loans. The company is aiming at a loan book of Rs 6,000 crore by 2022, and Rs 2,500 crore by March 2019.

In January this year, private equity fund Norwest Venture Partners led a Rs 193 crore of funding round along with Baring Private Equity India and Evolvence Fund. This round saw the exit of early stage investor Banyan Capital that took home Rs 93 crore towards its 25% stake that it had acquired for Rs 18 crore in 2012, making it a five-times return on investment.

The remaining Rs 100 crore went towards primary capital that the company used to expand and grow its business.

Currently, Norwest Venture that brought in Rs 108 crore holds around 24.46% stake in the company while Baring Private Equity India and Evolvence hold 8.78% and 8.23% respectively.

Post this deal, TPG is likely to hold around 30% stake in the company, sources told ET, valuing the company at around Rs 1,150 crore.

The financial services sector is a key focus area for TPG in India and Asia more broadly. For more than 15 years, the firm has been partnering with dynamic companies across the region, including Five Star Business Finance, BFI Finance, BTPN, Jana Small Finance Bank, Baidu Financial Services, Shriram City Union Finance, Shriram Transport Finance, and Union Bank of Colombo.

Spark Capital acted as the exclusive financial advisor on the transaction.

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