Kedaara picks up 5% in Axis Finance for Rs750 crore, sets benchmark for IPO-headed NBFC

Axis Finance has secured ₹750 crore in primary capital from private equity firm Kedaara Capital for a 5.08% stake, the non-banking financial company's parent Axis Bank said in a regulatory notice on Saturday.

Homegrown private equity firm Kedaara will be allotted 43 million shares on a preferential basis at Rs172.81 apiece, Axis Bank said. This would value the shadow lender at Rs14,764 crore. This marks the first-ever raise for Axis Finance from an external investor, remaining subject to external approvals.

Kedaara, led by Manish Kejriwal, Sunish Sharma, and Nishant Sharma, manages funds focused on Indian market opportunities and has previously invested in financial services businesses such as Veritas Finance, Aavas Financiers, CreditAccess Grameen, and AU Small Finance Bank.

The infusion comes right after the Rs1,500 crore primary rights issue from Axis Bank that Axis Finance approved on 17 April. The combined Rs2,250 crore fundraise makes this the NBFC's largest primary raise till date.

"This transaction will significantly bolster the company’s capital base and propel its next phase of growth, further deepening credit penetration in India," a press statement from Axis Bank read. "With this primary infusion, AFL’s Tier 1 capital and capital adequacy (CRAR) will get enhanced."

Currently, Axis Finance's Tier 1 CRAR stands at 13.82%. CRAR, short for capital risk assets ratio, is an indicator of financial health of a lender and is expressed as a percentage of its risk-weighted assets.

Increased central bank oversight

The capital infusion follows a period of heightened regulatory oversight by the Reserve Bank of India, which has increased risk weights on certain consumer loans to curb breakneck growth in unsecured credit. Amid growth headwinds, Indian shadow banks are increasingly seeking equity to meet capital requirements and tap into rising credit demand in the world's fastest-growing major economy.

Axis Finance, a wholly-owned subsidiary of India’s third-largest private lender, competes in a sector that includes Bajaj Finance, Tata Capital, Shriram Finance, and the newly formed Jio Financial Services.

But beyond funding operations for the lender, the capital from an external investor also has a strategic purpose.

"The fundraise basically establishes a valuation benchmark for any future fundraises from external investors and a potential initial public offering down the line," a person involved in the transaction told Mint, wishing to remain unnamed.

IPO mandate trigger

While there in not clear visibility on the company's initial public offer soon, a mandatory listing requirement can be triggered once the firm becomes sizeable enough, this person explained.

"There's no rush for an IPO right now. But it is only a matter of time before Axis Finance becomes an upper layer NBFC, which is around 2-3 years down the line. Once that scale is achieved, the company will have to go public as per current regulatory requirements," this person added.

Axis Bank's managing director and chief executive Amitabh Chaudhary had said in October 2025 that Axis Finance's IPO process is “very much on” even as the lender awaited final regulatory clarity from the central bank.

A draft amendment by the RBI from 10 April proposes a Rs1 trillion asset size threshold for an NBFC to be classified as upper layer. Axis Finance's March-end assets under financing stand at ₹47,692 crore, with a four-year CAGR of 29%.

Currently, a two-step approach to identifying upper layer NBFCs includes adding the top 10 companies by asset size and identifying the rest by a methodology comprising a 70-30 mix of quantitative-qualitative parameters and supervisory judgment. Upper layer NBFCs must mandatorily list within three years of being identified and notified as such, according to the central bank.

The current list of 15 upper layer NBFCs includes LIC Housing Finance, Bajaj Finance, Shriram Finance, Tata Sons, Cholamandalam Investment and Finance Co., L&T Finance, and Mahindra & Mahindra Financial Services.

Axis Finance CEO Sai Giridhar, in a press release, said the capital provides the company with the capacity to address credit needs in a "targeted and prudent way."

The shadow lender's net profit for fiscal 2026 jumped 19% year-on-year to Rs806 crore from the year before's Rs676 crore, with net non-performing asset ratio remaining sequentially flat at 0.36% for the March-end quarter.