IFC to pick up 20% stake in DHFL's new NBFC

Plans to invest up to Rs 12.5 crore for stake in Avanse

International Finance Corporation is planning to pick up a 20% stake in DHFL-promoted Avanse Financial Services Private Limited (Avanse), a specialised greenfield NBFC.

The Corporation is planning to invest upto Rs 12.5 crore for a 20% stake in Avanse, according to IFC's project disclosure.

Avanse is being promoted by Dewan Housing Finance Limited (DHFL), which holds 48.5% stake, with the balance 51.5% stake being held by the individuals and entities affiliated to the Wadhawan group. The new NBFC will be focused towards providing education loans for higher education.

The fund raising is part of Avanse's Rs 60 crore capital raising programme.

The company is expected to utilise the funding from IFC for establishing its education loan business that will cater to markets across India. Avanse will leverage the existing infrastructure platform of DHFL, which is spread over 400 locations with a strong presence in the states of Andhra Pradesh, Karnataka, Maharashtra, Tamil Nadu and National Capital Region, according to its project disclosure report.

IFC stated that the project is intended to increase access to finance for the education sector, a space that is substantially underpenetrated, with less than 15% of the company's target segment having any access to finance for this purpose.

The company expects to provide loans to more than 60,000 new students in the next seven years. It provides retail education loans for higher studies with average loan value being lower than $100,000.

This project shall demonstrate a commercially viable model of NBFC financing for education in India and attract investments in this space, said IFC. The success rate of banks in this space has been limited and it is hence critical that alternative financing models be encouraged, it added.

The Corporation said that it's key role at this stage involves potentially attracting lenders, providers of working capital and other equity investors in subsequent rounds of funding by signaling an institutional endorsement for the Greenfield venture's business model. The Corporation will help Avanse strengthen its balance sheet and potentially raise more equity capital over its build-up phase as envisaged in its business plan.