BPEA EQT set to acquire majority stake in HDFC Credila for ₹9,060 cr

BPEA EQT group (formerly Baring Private Equity Asia), in partnership with ChrysCapital, is set to acquire around 90% stake in Housing Development Finance Corporation's wholly owned education financial subsidiary HDFC Credila Financial Services Ltd (HDFC Credila) for ₹9,060.5 crore, HDFC announced.

Mint had first reported on 7 May that sovereign wealth funds and private equity firms including BPEA EQT (formerly Baring Private Equity Asia) Blackstone, Abu Dhabi Investment Authority (ADIA) and Singapore’s GIC were some of the suitors that expressed interest in acquiring a stake in HDFC Credila. IndusInd Bank and Kotak Mahindra had also evinced interest for the same.

In a regulatory filing late Monday, the country's largest mortgage financier said Kopvoorn B.V., Moss Investments Limited, Defati Investments Holding B.V. and Infinity Partners will acquire approximately 132.9 million shares of HDFC Credila.  

Kopvoorn B.V. is part of the BPEA EQT group. Moss Investments Limited, Defati Investments Holding B.V. and Infinity Partners are part of the ChrysCapital group.

The Investment Agreement was executed on 19 June, 2023, the filing said.

HDFC said it "has executed definitive documents on June 19, 2023 for proposed disinvestment/ sale of approximately 13,29,49,207 equity shares of HDFC Credila representing approximately 90% of HDFC Credila’s total issued and paid-up share capital as on date, to the Acquirers..., subject to regulatory approvals and dispensations."

The transaction will require approvals from the Reserve Bank of India (RBI -which regulates HDFC as well as HDFC Credila) and monopoly watchdog Competition Commission of India (CCI).

The closing of the proposed transaction shall take place on such date which falls 15 business days from the completion of all conditions precedent (including receipt of regulatory approvals) or such other date as may be mutually agreed between the parties. The Long Stop Date is March 31, 2024, the filing added.

Pursuant to the proposed transaction, HDFC Credila will cease to be a subsidiary of the Corporation, and the Corporation’s shareholding in HDFC Credila will be less than 10% of HDFC Credila’s total issued and paid-up share capital.

Currently, HDFC owns 100% in HDFC Credila.

On April 21, HDFC had informed that HDFC Bank had made certain requests to the RBI which provided certain forbearances/ clarifications to HDFC Bank.

"Under the said letter, RBI had inter alia advised that shareholding in HDFC Credila Financial Services Limited (“HDFC Credila”) (a wholly-subsidiary of the Corporation) be brought down to 10% within two years from the effective date of the Scheme," the disclosure said.

Total revenue of HDFC Credila during FY23 stood at ₹1,352.18 crore while its net-worth as on 31 March, 2023 was ₹2,435.09 crore.

As a part of the proposed deal, investor consortium will also infuse ₹2,003 crore as subscription amount in Credila.

HDFC had picked Jefferies Financial Group Inc to manage the sale of Credila, among the largest education loan financing companies in India, and could seek a value ranging between $1-1.5 billion (around ₹8,100- ₹12,000 crore).

In April, Keki Mistry, the vice-chairman and chief executive officer of HDFC, said the company had received several bids for a stake sale in the wholly-owned education loan subsidiary.

HDFC’s talks to sell a stake in Credila over the past years were put on hold since it was awaiting clarity from the Reserve Bank of India (RBI) on the mega merger.

Brothers Anil and Ajay Bohora founded Credila Financial Services as a dedicated education loan financier in 2006.

A year later, DSP Merrill Lynch invested to buy 40% equity in the lender. After DSP Merrill Lynch got acquired by Bank of America, HDFC bought the stake held by DSP Merrill Lynch in Credila in 2009.