Motilal Oswal, promoters likely to pare stake in non-banking lender IKF Finance

Investors and promoters of IKF Finance are looking to sell a controlling stake in the Hyderabad-based non-bank lender in a deal that could value it at $200-250 million, said three people with knowledge of the development.

“Motilal Oswal PE, which holds a significant minority stake in the company, is looking to exit and there is likely to be some primary fund-raise too, leading to a majority stake being on offer,” one of them said.

Motilal Oswal Private Equity, or MOPE, first invested in IKF Finance in 2015. In April last year, IKF Finance raised ₹250 crore in a funding round led by Accion’s Digital Transformation Fund.

“The deal, depending on the buyer interest, is likely to be a full sale given the right price,” said the second of the three people, all of whom spoke on condition of anonymity. 

In the absence of a second generation to run the business, the promoters are likely to cede control to incoming buyers, this person said.

Emailed queries sent to Motilal Oswal Group and IKF Finance did not elicit any response.

Founded in 1991 by VGK Prasad, IKF Finance has a presence in commercial vehicles, construction equipment, and the three- and four-wheeler segments, and in financing for small and medium enterprises.

As of 31 December 31, promoters held a 42.84% share, followed by two funds (India Business Excellence Fund II – 11.12% and IIA – 18.60%) managed by Motilal Oswal Private Equity. 

As much as 7.96% of the company is held by Accion Digital Transformation Fund, and another 7.96% by Teachers Insurance and Annuity Association of America.

Continuing growth

IKF Finance’s total income increased to ₹287 crore in 2022-23 from ₹221 crore in the year before, while net profit improved to ₹50 crore from ₹40 crore, according to Care Ratings.

For the first nine months of FY24, IKF reported a net profit of ₹47 crore on a total income of ₹300 crore, and a 2.11% return on total assets and credit cost of 0.51%.

IKF Finance has been able to register continuous growth with comfortable capitalisation.

Over the three years ended 31 March, 2023, IKF grew at a compound annual growth rate of 23%, from ₹1,315 crore as on 31 March, 2020 to ₹2,452 crore as at the end of March 2023, Care Ratings said in a statement. 

In FY23, IKF disbursed loans amounting to ₹1,674 crore, 71% higher than that in FY22. 

In the first nine months of FY24, IKF Finance disbursed ₹1,725 crore, which improved its assets under management to ₹3,222 crore as of 31 December from ₹2,452 crore as of 31 March, 2023.

Vehicle finance continues to be key focus area for IKF Finance. It accounted for about 77% of the lender’s overall AUM as on 31 December.