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Mumbai/New Delhi: Corporate financer InCred Financial Services Ltd is in talks with pension and sovereign wealth funds to raise $150 million to fund its expansion plans following the completion of a merger with the corporate finance arm of private equity firm KKR India Financial Services Ltd, said four people with knowledge of the plans.

The company is seeking a valuation of $750-800 million for the funding round that will see both “new and existing investors participate", said one of the four people.

“Investment bank Avendus is helping the firm find investors. They have held early talks with Canadian pension funds and some sovereign wealth funds and family offices from the Middle East," a second person added. All four spoke on the condition of anonymity.

InCred group counts Investcorp, Oaks, Moore Capital, Elevar Equity and Paragon Partners as investors. The Mumbai-based financial services firm is also backed by former Deutsche Bank chief late Anshu Jain, Manipal Group chairman Ranjan Pai and founding chairman of Landmark Holdings (Dalmia Group) Gaurav Dalmia, among others.

“While InCred Finance is growing at a very steady pace, we are under leveraged at the moment and, hence, the current capital base can comfortably support our growth. Our debt-to-equity ratio is also at a comfortable 1.5/1… Whenever the need arises to formally raise equity, we will be happy to share statement with the media," a spokesperson for InCred Group’s NBFC arm, InCred Finance, said in response to queries.

“While talks are on mainly for a primary fundraise, there could be a secondary portion to it where some existing investors will sell partial stakes. The final contours of the round are yet to be worked out," said a third person cited above. “The firm is targeting to complete the round by September quarter," he added.

Founded in 2016 by Bhupinder Singh, InCred Finance is a new-age lender offering loans online and offline to consumer, small businesses and for education. The non-banking financial company (NBFC) merged with KKR India Financial Services Ltd in 2021 in an all-stock deal, which was completed last year. According to a joint statement by the companies, the merger will create an NBFC with a $600-million (around 4,700-crore) balance sheet and an equity base of $300 million.

The business has seen an uptick and now with the merger coming through, the books are integrated, and the company is targeting its next phase of growth, the fourth person said.

While capital adequacies of NBFCs remains robust, lending growth through NBFCs has seen an increase over the past quarters. Under the merger terms, KKR, along with two other investors, Teacher Retirement System of Texas, and Abu Dhabi Investment Authority, hold a 35% stake in the merged entity. KKR alone holds 15-16% in the consortium. InCred Finance is a strategic investment for KKR and not a portfolio company.

“A shift in the segmental distribution of credit with a tilt towards retail and a fall in the industry has been observed... At the end of H1FY23 (April to September), aggregate credit extended by NBFCs grew 13.1% and stood at 31.5 trillion," according to a report by CareEdge Ratings (Care Ratings Ltd). Over 9,000 NBFCs are registered with the Reserve Bank of India. Shadow banks, as NBFCs are often referred to, are also the largest net borrowers in the financial system.

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