Mumbai: Canadian pension fund Caisse de dépôt et placement du Québec (CDPQ) has signed an agreement to invest more than ₹1,800 crore ($250 million) in ECL Finance Ltd, the non-banking financial company (NBFC) of Edelweiss Group said on Tuesday.
CDPQ will make the investment through its arm, CDPQ Private Equity Asia Pte Ltd, according to a statement by ECL Finance. The proposed investment will close after regulatory approvals, it said.
“Credit penetration in India will be the key to advancing India’s economic gains, driven by the long-term trends in democratization of credit, rising household incomes and increased consumption. I expect this partnership to deliver tremendous value towards deepening the market," said Rashesh Shah, chairman and chief executive officer (CEO), Edelweiss Group.
The agreement with CDPQ will enable ECL Finance to capitalize on opportunities in the credit market. “It provides thrust to the business for tech and digital investments. This investment also ensures that ECL Finance has the requisite resources to maintain strong organic growth, as well as take advantage of any market consolidation opportunities," the company said.
The development comes at a time when the NBFC sector has been witnessing a liquidity crunch, triggered by defaults by the Infrastructure Leasing and Financial Services (IL&FS) group. The crisis has already resulted in some groups selling parts of their business to tide over the liquidity crisis.
Last month, global private equity giant Blackstone Group Llp had acquired a controlling stake in Aadhar Housing Finance Ltd for around ₹3,000 crore, while IIFL Holdings Ltd had agreed to sell its commercial vehicle financing unit to IndoStar Capital Finance Ltd, a lender promoted by private equity fund Everstone Group, for around ₹2,500 crore.
This is CDPQ’s second investment in Edelweiss Group. CDPQ had in 2016 signed an agreement with Edelweiss Group to invest approximately ₹5,000 crore (nearly $750 million) in stressed assets and specialized corporate debt in India.
“This new investment capitalizes on solid growth in the financing demand from SMEs and residential sectors, both of which are key drivers in sustaining India’s future growth," said Michael Sabia, president and CEO, CDPQ.
As on 31 December, ECL Finance had a loan book of around ₹30,000 crore, spread across wholesale and retail finance segments.
“Credit has been our strength and we are well positioned to capitalize on the India opportunity. At this stage of our expansion, we are excited to join hands with CDPQ to fuel our retail lending business across India. Our competitive edge will come from investments in the direct technology platform and next generation data analytics as we scale across SMEs, affordable housing, agri-loans and rural finance," said Deepak Mittal, managing director and chief executive officer, ECL Finance.
In February, Insurer Allianz AG, through its investment management arm Allianz Investment Management, announced an investment of $200 million in the private debt platform of Edelweiss. The deal marked Allianz’s first investment in the private debt and distressed assets space in India. The Allianz investment was part of the $1.3 billion worth of commitments that Edelweiss had secured for its EISAF II fund.