Avanse Financial Services Limited, one of India’s leading non-banking financial companies (NBFCs) specializing in education financing, is gearing up for its highly anticipated Initial Public Offering (IPO). The company plans to raise ₹3,500 crore through the IPO, which will include a fresh issue of ₹1,000 crore and an offer for sale (OFS) worth ₹2,500 crore. This blog provides a comprehensive overview of the IPO, its financial performance, and the company’s future growth plans.
Avanse Financial Services: Company Profile
Founded in 2013, Avanse Financial Services focuses on providing comprehensive education financing solutions. The company is India’s second-largest education-focused NBFC by assets under management (AUM) and is also second in terms of disbursements and profit as of March 2024.
Avanse’s offerings include:
- Student loans for both domestic and international education.
- Infrastructure loans for educational institutions.
- Value-added services like insurance, foreign exchange, financial health reports, and overseas bank account setup.
The company operates with a hybrid distribution model, with 545 locations across India. This includes 19 branches, 320 education advisors, 452 direct selling agents (DSAs), and a robust digital acquisition network.
Avanse Financial Services IPO: Key Details
- IPO Size: ₹3,500 crore (₹1,000 crore fresh issue + ₹2,500 crore Offer for Sale)
- IPO Type: Book Built Issue
- Face Value: ₹5 per share
- Listing: BSE, NSE
- Lead Managers: Kotak Mahindra Capital, Avendus Capital, J.P. Morgan, Nomura, Nuvama Wealth Management, SBI Capital Markets
- Registrar: Link Intime India Private Ltd
Investor Categories and Allocation:
- Qualified Institutional Buyers (QIB): Up to 50% of the net offer
- Retail Investors: Minimum 35% of the net offer
- Non-Institutional Investors (NII): Minimum 15% of the net offer
Financial Performance: Strong Growth Trajectory
Avanse Financial Services has shown impressive growth across various financial metrics. From March 2023 to March 2024, the company experienced significant increases in revenue, profit, and net worth. Below is a snapshot of the company’s financial performance:
Financial Summary (₹ in Crores)
| Particulars | March 2024 | March 2023 | March 2022 |
| Revenue | ₹1,728.81 | ₹990.23 | ₹508.28 |
| Profit After Tax (PAT) | ₹342.40 | ₹157.71 | ₹63.21 |
| Net Worth | ₹3,676.72 | ₹2,149.72 | ₹1,182.70 |
| Reserves | ₹3,560.38 | ₹2,040.73 | ₹927.07 |
| Borrowing | ₹10,135.25 | ₹7,210.13 | ₹4,722.15 |
| Total Assets | ₹14,343.84 | ₹9,729.95 | ₹5,433.81 |
| Total Liabilities | ₹14,550.54 | ₹9,823.96 | ₹5,433.81 |
| Diluted EPS (₹) | ₹15.05 | ₹8.50 | ₹3.78 |
Revenue and Profit Growth:
- Revenue: Grew by 75% from ₹990.23 crore in FY 2023 to ₹1,728.81 crore in FY 2024.
- Profit (PAT): Increased by 117%, from ₹157.71 crore in FY 2023 to ₹342.40 crore in FY 2024.
- Net Worth: Jumped from ₹2,149.72 crore in FY 2023 to ₹3,676.72 crore in FY 2024, indicating robust capital growth.
IPO Objectives:
The funds raised from this IPO will be used for several strategic purposes:
- Cover IPO Expenses: A portion of the funds will be allocated to cover expenses related to the IPO process.
- Expand Capital Base: The fresh issue will strengthen the company’s capital base to support business expansion and meet increasing asset requirements.
Industry Outlook: Strong Demand for Education Financing
The Indian education sector is booming, and education financing is becoming increasingly crucial. Key trends driving this growth include:
- The overseas education loan market has been growing at a 32.8% CAGR from March 2019 to December 2023, with further growth expected at 26-27% CAGR from 2023 to 2028.
- The Indian education sector is valued at ₹13.5-14.0 trillion in FY 2024 and is expected to grow at a 12-13% CAGR between 2024 and 2029, supported by rising demand, increasing education costs, and evolving government policies.
- The domestic higher education market, valued at ₹3.9 trillion in FY 2024, is forecasted to grow at 11-13% CAGR from 2024 to 2029, driven by demographic trends and rising aspirations.
Avanse’s Unique Positioning and Competitive Edge:
- Pan-India Presence: With 545 locations across the country, Avanse has a wide distribution network that ensures it can serve a large base of students and institutions.
- Technological Integration: Avanse utilizes technology-driven underwriting and collections to maintain a low loan default rate and ensure smooth operations.
- Diversified Product Portfolio: The company’s offerings go beyond just loans, with value-added services like insurance, foreign exchange, and overseas bank account setup, creating an all-encompassing solution for students and institutions.
Risks and Challenges:
- Regulatory Risks: Ongoing investigations involving former promoters could affect market sentiment and business operations.
- Capital Dependency: The company heavily depends on external capital, and any disruption in capital availability could negatively affect operations.
- Credit Risk: A significant portion of the loan portfolio consists of unsecured loans, which increases credit risk.
- Market Competition: Competition in the education finance sector could intensify, potentially impacting Avanse’s market share and growth trajectory.
Conclusion:
The Avanse Financial Services IPO represents an exciting opportunity to invest in a leading player in India’s growing education finance sector. With a robust financial performance, a wide distribution network, and an expanding portfolio of products, Avanse is well-positioned to capitalize on the rising demand for education financing. However, potential investors should carefully consider the risks associated with regulatory uncertainties and capital dependency.
This IPO could be a strong addition for investors looking to tap into the education financing boom, backed by solid growth, profitability, and a diversified range of services.
