Mumbai: ChrysCapital Advisors LLP, the largest home-grown private equity (PE) fund, is in advanced talks to buy a significant minority stake in Thirumeni Finance Pvt. Ltd, a Bengaluru-based non-banking financial company (NBFC) that operates under the name Varthana, according to two people aware of the development.
The investment in the company, which lends to affordable private schools, will be around $50 million (Rs320 crore), the two said on condition of anonymity.
Varthana, set up by Brajesh Mishra and Steve Hardgrave in 2013, supports more than 2,000 schools with 38,000 teachers and 1 million students.
Till date, Varthana has disbursed more than $35 million to schools that serve lower- and middle-income groups.
“ChrysCapital is in advanced stages of discussions with Varthana and the deal is likely to be signed in a couple of weeks’ time,” said one of two people cited above.
Promoters will dilute their stake and no existing investor will participate in this round of funding, he added.
Varthana has already been funded by venture capital and PE firms since 2015.
In April 2016, Varthana raised Rs93 crore ($14 million) in a Series B round of financing from Kaizen Private Equity and Zephyr Peacock India, along with existing investors Elevar Equity, LGT Venture Philanthropy and Omidyar Network.
In its series A round, Varthana had raised Rs32 crore from marque investors, including former Credit Suisse banker Vikram Gandhi and Genpact Ltd founder Pramod Bhasin in 2015.
In October 2017, Varthana raised $3 million in funding from the Michael and Susan Dell Foundation to expand its school transformation program (STP).
Through the STP initiative, Varthana provides educational assessments, hands-on support, vendor connections and financial rewards to schools in different states.
Varthana, which provides loans in the range of Rs5 lakh-Rs1 crore, also works with school management teams to improve their learning outcomes by improving their teaching quality and technology, among other things.
Mails sent to Mishra, director and chief operating officer of Varthana, and a ChrysCapital spokesperson went unanswered.
ChrysCapital already has a wide exposure to the NBFC space with investments in Magma Fincorp Ltd, which is engaged in vehicle financing, housing finance and small and medium enterprises financing; Hero FinCorp Ltd, which is in two-wheeler financing, supply chain finance and business loans; and AU Small Finance Bank, a Rajasthan-based NBFC involved in vehicle financing, property-backed business loans and mortgages.
With over $3 billion of assets under management across seven funds, ChrysCapital has made close to 80 investments in India and 60 full exits.
Varthana’s competitor Indian School Finance Co. Pvt. Ltd (ISFC), which lends to companies in the education sector, is also in discussions to raise around $30-35 million (around Rs200-230 crore) from PE investors, Mint reported in November.
PE investments in NBFCs have declined in the last three years.
Transactions worth $888 million and $543 million were struck in 2016 and 2017, down from $1.2 billion in 2015, according to data from advisory firm Grant Thornton.
Between calendar years 2014 and 2017, the share of NBFCs in total loans is estimated to have increased from 21% to 44%, whereas for public sector banks, it fell from 49% to 28%, according to a report released by Boston Consulting Group (BCG) in November.