By AltG Research On Behalf Of Poornima Vardhan And Taponeel Mukherjee
In a recent development, HDFC wants to sell its wholly-owned subsidiary Credila for a deal value pegged at $1 Billion. There have been around 12-14 suitors for the asset, showing both the potential for the education loan sector in a young country such as India as well as a scarcity of deals in the big ticket space with significant pools of capital looking to invest in the Indian financial consumer services growth story.
3 Key takeaways:
1. All Global Investment Roads Lead To India: If you need to invest in high-growth markets, every global investor must head to India. With a majority of India's population under 25, the opportunity financial services provides is unmatched globally. Therefore, it is no surprise that every major investor has evinced interest in HDFC Credila. If the $1 Billion tag holds on the deal value, this further cements the position of the Indian consumer markets.
2. Significant Value For Small Cap Creators: A potential $1 Billion tag for a business that does about $ 30 million in PAT tells us the intense demand for high-quality assets in India's large-cap private equity space. It also shows the opportunity to build platforms from the $50 million level to the $1 Billion in generating exceptional investment returns. The opportunity to create small-cap champions is unparalleled in India.
3. Future Promise Of Indian Financial Services: Indian Financial services sector has been an attractive destination for Private Equity investments. However, the focus of investments so far has been mainly on lenders. What is the next big opportunity for Indian Financial Services Private Equity? The answer lies in Financial Services Data. As consumer products get fully financialised, the next stage of returns will be delivered by financial services businesses that can tap into the growth in the B2B MSME segment.
In summary, the intense competition for the HDFC Credila deal points to the larger opportunity in India and the need for creative deal-making.