Partners Group and Kedaara acquire housing finance arm

The acquisition of a controlling stake from Au Housing is expected to be completed in April following clearance by India’s housing finance regulator National Housing Bank.

Swiss investment firm Partners Group and India’s Kedaara Capital have entered into a joint venture to acquire a controlling stake in Au Housing, the housing finance arm of Indian financial services company Au Financiers for INR9.5 billion ($139 million; €124 million), according to reports.

The deal, which is expected to close in April, has been approved by the Reserve Bank of India and is subject to regulatory approval by the National Housing Bank.

Partners Group and Kedaara both declined to comment.

Kedaara first invested in Au Financiers in 2014, acquiring an almost 10 percent stake from existing investors the International Finance Corporation (IFC), the India Business Excellence Fund (IBEF) and IBEF Fund-I, according to a statement. 

The investment was made through Kedaara Capital Fund, a 2012-vintage vehicle that was oversubscribed and closed on $540 million. Known investors in the fund include the Ontario Teachers’ Pension Plan, Abu Dhabi Investment Authority, Temasek Holdings, Teachers’ Private Capital and RWB Private Capital Fonds, according to PEI’s Research & Analytics team.

Au Financiers was established in Jaipur in 1996 by Sanjay Agarwal and has over INR 50 billion in assets under management. It provides credit financing to lower income self-employed individuals and small businesses who do not have access to formal credit from banks and other financial institutions. The company operates in semi-urban and rural regions in north, west and central India across 247 branches.

Au Financiers is Kedaara’s first investment in the financial services sector in India. The firm typically invests between $25-75 million and invests more than $200 million in selected investments. Other investments from its fund include urology and laparoscopy hospital chain RG Stone Urology Research Institute, third party logistics company Mahindra Logistics, precision automotive manufacturer Bill Forges and folding carton manufacturer Parksons Packaging and plastics packaging company Manjushree Technopack.

The spread of microfinance in India has attracted the attention and capital of private equity investors in the past years. In January 2015, Ujjivan Financial Services raised INR 6 billion from CX Partners, World Bank arm International Finance Corporation and the Netherlands’ development finance institution FMO, making it the largest funding deal in the history of India’s microfinance sector. 

In November 2014, Janalakshmi Financial Services sold a minority equity stake to US-based manager TPG Capital for about INR 6 billion.

Partners Group, which has over $50 billion assets under management, opened its Indian office in Mumbai in November 2014. It has invested about $1 billion in the country to date.