HDFC Credila files confidential IPO papers with SEBI; looks to raise around ₹5,000 cr

Credila Financial Services Limited (formerly known as HDFC Credila Financial Services Limited) has filed for an initial public offering (IPO) via confidential pre-filing route with the Securities and Exchange Board of India (SEBI). The confidential filing means the company will not have to make their details public under the draft red herring prospectus (DRHP).

Backed by Swedish investment firm EQT and home-grown private equity firm ChrysCapital, the country’s largest education loan provider looks to raise around ₹5,000 crore via IPO route, which is expected to be a combination of fresh issue and offer for sale by existing shareholders.

The IPO comes after HDFC Bank in March this year completed the process of stake sale in education loans financier to a consortium of private equity companies EQT and ChrysCapital for ₹9,552.73 crore. The consortium valued HDFC Credila at a pre-money valuation of ₹10,350 crore with fresh equity infusion of ₹2,004 crore into the company, out of which ₹700 crore were invested in Q1 FY24 and the balance in Q4 FY24.

In June last year, HDFC Bank entered into a deal to sell its 90% stake in HDFC Credila after it completed merger with its housing lender parent HDFC on July 01, 2023. Post HDFC-HDFC Bank merger, the Reserve Bank of India had directed the lender to reduce its shareholding in the company to less than 10%. As on March 31, 2024, EQT holds 72.01%, ChrysCapital Group holds 18% and HDFC Bank Limited holds 9.99% shareholding in the Company.

Established in 2006 and headquartered in Mumbai, HDFC Credila is registered as a non-deposit taking non-banking financial institution (NBFI-ND) with the Reserve Bank of India (RBI). HDFC Credila provides education loans to students pursuing higher education in India and overseas, with two main product categories - secured education loans and unsecured education loans. Currently, 21% of the company’s education loans portfolio is secured while 79% is unsecured, as per its FY24 annual report.

It claims to have extended loans to over 1.24 lakh customers, with the current loan book at over ₹26,000 crore. Borrowings constituted 82% of the total funds employed as at March 31, 2024, of which 72% was in the form of term loans and 28% in the form of ECBs, debentures, commercial papers and WCDL.   

For the financial year ended March 31, 2024, the company earned a profit after tax of ₹528.8 crore against total income of ₹2,771 crore. During FY24, education loans disbursed by the company increased by 76% from ₹7,992 crore in FY23 to ₹14,089 crore in FY24, whereas the repayments of principal including pre-payments rose by 23% year-on-year to ₹2,554. The outstanding loan assets grew by 84% from ₹15,298 crore in FY23 to ₹28,187 crore in FY24.

The education sector in India was estimated to be worth $117 billion in FY20 and is expected to reach $225 billion by FY25. There are 4.33 crore students currently enrolled in higher education in India, making this an attractive business opportunity. The total education loans outstanding in India as at March 2024 stood at ₹1,60,703, of which ₹43,416 crore could be attributed to the NBFC sector, as per HDFC Credila annual report for FY24.