Private equity majors TPG, ChrysCapital, Creador Capital and Goldman Sachs are vying to invest up to ₹600 crore for a significant minority stake in Jaipur-based Ess Kay Fincorp Ltd, said two people with direct knowledge of the development.
In its first external funding in 2012, Ess Kay had secured ₹18 crore from BanyanTree Growth Capital.
Subsequently in January 2018, US-based Norwest Venture Partners, Baring Private Equity India and Evolvence India had led a $32 million (₹200 crore) equity investment in Ess Kay. As part of the transaction, BanyanTree had sold its entire 25% stake to Norwest.
Founded in 1994 by first-generation entrepreneur Rajendra Setia, Ess Kay facilitates purchase of used commercial vehicles, tractors, cars and two-wheelers, and provides business loans to small and medium enterprises (SMEs).
“Ess Kay is a very differentiated company and the largest private commercial vehicle company in India,” said one of the people cited above, requesting anonymity. “Its credit quality has improved and it has about ₹1,500 crore of assets under management.”
“It is planning to launch an initial public offering within the next three years. The company’s current valuation is 2.4-2.5 times the value of its last round,” he added.
Ess Kay has 226 branches across Rajasthan, Madhya Pradesh, Gujarat and Punjab. It employs about 1,800 people and has 120,000 customers, according to its website.
When contacted, Goldman Sachs, Creador Capital and TPG refused to comment on the development, while ChrysCapital did not respond to mails seeking comments. Norwest did not reply to phone calls or an email query. Ess Kay refused to comment, citing confidentiality reasons.
On 13 August, The Economic Times had reported that some other bulge-bracket private equity firms such as Carlyle, Warburg Pincus, Morgan Stanley PE are also in the race for Ess Kay.
The commercial vehicle sector faced a challenging first quarter this year, with sales declining 9.1%, primarily due to the uncertainties following the roll-out of the goods and services tax, according to an Icra report.
In the near-term, the sector is expected to be under pressure. However, the industry is expected to bounce back, aided by higher demand from consumer-driven sectors and e-commerce logistics service providers.
Crisil Research expects domestic commercial vehicles sales to grow 12% in FY 19, driven by increased infrastructure and construction projects in a pre-election year.
An EY report on PE and VC investments said financial services recorded maximum investments and deals in the first half of this year with 74 deals worth $4.1 billion.
Investments in the NBFC space were also driven by the fact that financial services were considered a proxy to the India growth story.
“The FS sector also provides a diverse universe of investment opportunities, with companies ranging across the value chain, including banks, NBFCs, and microfinance companies” the report added.