CVC Capital Partners wins bid for Aavas Financiers, valuing it at ₹13,019 crore

CVC Capital Partners has emerged as the successful bidder for Aavas Financiers, formerly known as AU Housing Finance on August 10. The formal announcement came on Saturday evening, with CVC outbidding rival EQT, as per an exchange filing.

The deal marks a significant milestone for current promoters Kedaara Capital and Partners Group, who are set to exit their investment after eight years with an impressive 6x return.

Holding a combined 26.47% stake in Aavas, their exit will trigger an open offer for an additional 26% of shares from public shareholders, potentially leading to a change in control of the company, the filing added.

CVC's winning bid values Aavas at approximately ₹13,019.67 crore, offering ₹1,635 per share. If the open offer is fully subscribed, CVC stands to acquire a controlling 52.47% stake in Aavas, with a potential total investment of ₹7,089 crore. This would make it the largest buyout in the sector to date, surpassing Warburg Pincus' acquisition of Shriram Finance in May.

The news comes after earlier reports of Kedaara Partners and Partners Group considering an exit from Aavas Financiers.

Aavas Financiers share price outlook

In related news, financial services firm Nirmal Bang has maintained a buy rating on Aavas Financiers, setting a target price of ₹1,775. The firm cited India's significant housing shortage and low mortgage penetration as key factors supporting growth prospects in the sector.

Nirmal Bang stated, “India's significant housing shortage (100 million units housing demand), low mortgage penetration (12.3 per cent of GDP as of FY23), rising per capita income and affordability indicate huge scope for growth over a multi-year horizon.”

Meanwhile, Aavas Financiers recently reported strong financial results for Q4 2024. The company saw a 21.41% increase in revenue and a 12.34% rise in profit year-over-year. Compared to the previous quarter, revenue grew by 7.84% and profit increased by 22.07%. The company's EPS for Q4 stood at ₹18.43, marking a 10.57% increase year-over-year.

This acquisition by CVC Capital Partners could potentially reshape the landscape of India's housing finance sector, signaling continued interest from global investors in the country's financial services industry.