Mumbai: US-based Norwest Venture Partners, Baring Private Equity India and Evolvence India have led a $32 million (Rs200 crore) equity investment in Jaipur-based vehicle and small and medium enterprise (SME) finance company Ess Kay Fincorp Ltd, the non-banking financial company said on Wednesday.
This is the second round of private equity (PE) investment in the company. In 2012, PE firm BanyanTree Growth Capital invested Rs18 crore in Ess Kay. Mint reported in September that the company was in talks with investors such as Norwest to raise Rs200 crore.
In the latest round, Norwest has invested Rs108 crore in the company with the rest coming from Baring and Evolvence, said Atul Arora, chief financial officer at Ess Kay Fincorp. Spark Capital Advisors was the financial advisor to Ess Kay Fincorp.
“BanyanTree Growth Capital, with a 25% stake, completely exited the company as part of this round," he said.
Founded by Rajendra Setia, Ess Kay Fincorp provides vehicle finance and SME finance in rural and semi-urban India. It funds purchases of used commercial vehicles, tractors, cars, two-wheelers and also provides business loans to SMEs.
Ess Kay operates through a network of around 240 branches in six states across northern and western India. It has more than 75,000 customers with a loan book exceeding Rs1,100 crore. Ess Kay will use the funds raised to invest in building scale by deepening its presence in existing locations and expanding operations into new geographies.
“Last year, we significantly scaled up in Gujarat. Our focus now is to expand presence in Madhya Pradesh, Maharashtra, Punjab and Haryana. The company is aiming at a loan book of Rs2,500 crore by March 2019 and Rs6,000 crore by 2022," said Arora.
The average ticket size for vehicle loans is Rs3 lakh over an average tenure of three years, and Rs7 lakh for five-year SME loans.
“Given Norwest’s significant focus on investing in the Indian financials space, we found that Ess Kay is a differentiated NBFC with a focus on the semi-urban market for vehicle and small enterprise finance where it has demonstrated a track record of fast growth together with robust credit. With this growth equity round, Ess Kay is well positioned to leverage its strong franchise, excellent core team, distribution and large market opportunity to drive exponential growth," said Niren Shah, managing director at Norwest Venture Partners India.
The funds infusion, Rs100 crore which is primary investment, increases the capital pool available with the company, which directly translates into higher loan disbursement, and improved capacity to raise debt capital from the market.