Private equity (PE) firm BanyanTree Finance Pvt. Ltd has made its second investment in the auto finance sector, acquiring a minority stake in Kanakadurga Finance Ltd (KFL).
BanyanTree and Kanakadurga Finance did not disclose the investment size, but two people aware of the transaction said the PE firm had invested close to $10 million from BanyanTree Growth Capital Fund II in the non-banking financial company (NBFC) for a significant minority stake.
Established in 1994 by S. Laxminayarana, \Kanakadurga began operations in auto financing and gold loans. Last April, the firm entered the small and medium enterprise (SME) and business loans segment.
Vijayawada-based Kanakadurga, which has lent primarily to customers in the three-wheeler passenger and commercial segment in Andhra Pradesh, Telangana, Gujarat, Karnataka and Tamil Nadu, has a loan book of Rs200 crore.
This is BanyanTree’s second investment in an auto finance company. In 2012, the PE firm had bought a minority stake for an undisclosed sum in Jaipur-based NBFC Esskay Auto Finance Pvt. Ltd, which finances pre-owned commercial vehicles.
BanyanTree is a Mauritius-based PE that seeks to invest in SMEs across sectors in India. It typically invests in firms with more than $20 million in revenue.
BanyanTree Finance advises the $100 million BanyanTree Growth Capital and the $175 million BanyanTree Growth Capital-II funds, which are India-focused structured PE funds that provide capital to mid-market firms with promising growth prospects.
There has been a flurry of private equity investment in retail lending NBFCs in the past few years, driven by higher margins, lower delinquencies and a falling interest rate regime that is expected to boost borrowing and consumption.
According to Venture Intelligence data, PE funds have invested close to $155 million in NBFCs so far this year.
In 2016, PE funds pumped in a record $1.21 billion in 25 deals in NBFCs in India, a large chunk of which went to retail lenders.
AION Capital Partners, along with former GE Capital executives Pramod Bhasin and Anil Chawla, said in March last year that it was acquiring the financial service businesses of GE Capital India.
Hero FinCorp Ltd, the retail lending arm of Hero MotoCorp Ltd, said in September it had Rs1,000 crore from ChrysCapital Advisors Llp and other investors.