Student loan provider Avanse Financial looks to raise $250 million in private round after shelving IPO
The new round will be largely secondary, and will include a small primary component as the company is well capitalised following a capital infusion by Kedaara Capital ( ₹200 crore), Mubadala Investment Company ( ₹900 crore through its affiliate Alpha Investment Company LLC), Avendus PE Investment Advisors Pvt Ltd ( ₹100 crore via its Avendus Future Leaders Fund II), and internal accruals in FY24.
IPO shelved
The company, which filed draft papers for an initial public offering (IPO) with Sebi last July, is likely to postpone its IPO in favour of the private fundraise, these people said. Other investors in the company include International Finance Corporation (IFC) and Warburg Pincus.
On 31 July 2024, Avanse had filed draft documents for a ₹3,500-crore IPO, which included a fresh issuance of shares worth ₹1,000 crore and an offer for sale in which existing investors would sell shares worth ₹2,500 crore. It received Sebi's approval on 24 October.
'The company's window to go public closes in October (2025). Given the market conditions, it is unlikely to refile its documents," said one of the people cited above, who did not wish to be named as the discussions are private. IFC and Kedaara did not respond to Mint's queries while Warburg and Avanse declined to comment.
After Indian companies raised a record ₹1.69 trillion through IPOs in 2024, the euphoria around public offerings appears to be softening in 2025 amid volatile market conditions.
The mainboard segment, once flooded with enthusiastic bidders, is now seeing lukewarm interest, subdued subscription levels, and sharply lower listing gains. A Mint analysis revealed that only 19.2% of mainboard IPOs this year have been oversubscribed by 80 times or more, while 38.5% were oversubscribed by 1-10 times.
Median listing gains for mainboard IPOs have dropped to just 8%, while SME IPOs have seen a sharper decline to 4.6%—a far cry from 2024's 17.3% and 39.3%, respectively.
Second-largest provider
Avanse provides education financing, including international and domestic student loans and infrastructure loans for educational institutions. It disburses loans through a hybrid network of branches, education counsellors and digital channels.
Two NBFCs dominate the overseas education loan market. HDFC Credila Financial Services had a 62% share of the market as of 31 December 2023, while Avanse had a 24% share. Other key NBFCs in the space are Auxilo Finserve, InCred Finance, Prodigy Finance and MPower.
Avanse was also the second NBFC offering education loans that planned to go public after Credila, which is backed by ChrysCapital and EQT. Credila filed its updated draft papers last month for a ₹5,000-crore IPO.
'Credila's IPO would have served as a good measure of where the market stands on an education-focused NBFC," said the second person cited above. 'Avanse is likely to appoint a banker to manage its private round and initial talks have begun," the third person added.
According to Avanse's draft IPO papers, its AUM increased 65.86% to ₹13,303 crore in FY24 from ₹8,646 crore in FY23. Total income grew to ₹1,729 crore in FY24, with net profit rising to ₹342 crore. For comparison, the company posted ₹990 crore in operating revenue on a profit of ₹157 crore in FY23.
A bulk of its AUM came from overseas education loans, with growth in the segment driven by markets such as the US (48.30% of the overseas book), the UK (23.78%), and Canada (12.58%).
Avanse has given loans to students enrolled in 1,585 universities and colleges across 49 countries. It predominantly finances science, technology, engineering and mathematics (STEM) courses, which comprised 72.13% of its overseas education loan portfolio as of 31 December 2024. MBA and other courses accounted for the remaining 27.87%.
Niche but growing market
Overseas education financing is a niche market in India, largely funded by specialised NBFCs. It has been growing thanks to an increasing number of students choosing pursue higher education abroad. Avanse has been one of the biggest beneficiaries of this shift, gaining market share and maintaining its leadership position, Care Edge Ratings said in a report.
The credit rating agency noted that the company has an established presence and improving profitability, and is poised to raise funds at competitive rates and improve its operational efficiency. In FY25 the company posted an operating income of ₹2,350.8 crore and a profit of ₹504 crore.
However, Care added that the business could face headwinds from product and geographical concentration, moderate portfolio seasoning, and asset quality that's susceptible to risks inherent in the unsecured loans segment.
While the company receives a bulk of its revenue from the top four destination countries, it has gradually been diversifying into loans for educational institutions and students in India to reduce seasonality. It has also started offering loans Indian students for studying digitally, particularly for upskilling and test preparation, the report said.
In India, the education market – domenstic and overseas – was estimated at ₹18.5-19 trillion in FY24, according to a Crisil report published last year. Crisil expects India's overseas education market to outpace the domestic market. It estimates overall market to grow at a compound annual rate of 12-13% from FY24 to FY29, achieving ₹24 trillion in size.
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