Apax Partners is investing Rs 500 crore ($83 million; €62 million) in Cholamandalam Investment & Finance Company, in a deal that will ultimately give it an 8 percent equity stake in the business, according to a stock market disclosure.
Cholamandalam is the financial services arm of the Murugappa Group. It offers vehicle finance, home loans, home equity loans and SME loans, operates from more than 575 branches across India and has assets under management of more than INR 250 Billion.
“We believe in the long-term secular growth runway of Indian retail financial services, and Chola is well positioned in this space, with an outstanding management team and exposure to attractive lending segments,” Shashank Singh, managing director and head of Apax Partners India, said in a statement.
Apax will subscribe to 50 million compulsorily convertible preference shares (CCPS) at a face value of Rs 100 per share. The CCPS will convert into equity shares at Rs 407 each, translating into an issue of 12.2 million shares – equivalent to 8 percent of the diluted equity base.
The CCPS will carry a dividend coupon of 1 percent per annum payable from the date of allotment until the date of conversion into equity shares – which will happen in 12 months’ time or sooner if the board so decides, Apax said.
Apax was advised by Kotak Mahindra Capital Company, with Khaitan & Co and Kirkland & Ellis providing legal counsel. Axis Capital Limited was the exclusive transaction advisor to Cholamandalam.