Mizuho: The Japanese giant in hot pursuit of Avendus

Japan’s leading financial services group is likely to sign a definite agreement in a month to buy around 80% stake in the KKR-backed Indian financial services firm if all shareholders agree, the people cited above said on condition of anonymity.

However, the deal, which is in its final lap, will need a go-ahead from each of its three founders—Gaurav Deepak, Ranu Vohra and Kaushal Aggarwal—who wield separate vetoes on the transaction and the buyer.

“If the terms offered by Mizuho are not lucrative, the founders may decide to junk the share sale and directly aim at a public listing,” the first person cited above said, adding that the current management, headed by Deepak, is likely to continue running the business over the next decade even if Mizuho takes over.

Also read | Avendus Capital winds down hedge funds; Andrew Holland to leave firm

The second person cited above said that Mizuho is likely to pay anywhere between $650 million and $750 million for the stake purchase. The Japanese group had placed a binding bid last December and has been in discussions ever since with various stakeholders to conclude the deal.

“The other bidders, namely Nomura Group and PE (private equity) firm Carlyle, have most likely fallen behind in the race,” the second person added. To be sure, the shareholders—KKR Group, Gaja Capital, Alliance Tire Group’s founder Yogesh Mahansaria, and the founders of Avendus—have not yet signed a definitive agreement with any of the bidders.

Chennai-based TVS Group, which evaluated the opportunity for months, did not put in a binding bid that was due this January.

“Mizuho has begun talks with the lead investor KKR and once they arrive at a conclusion, it will be taken to other shareholders,” the third person cited above said.

Also read | TVS Credit to make a bid for Avendus Capital

Spokespersons for Avendus, Mizuho and KKR declined comment. Emailed queries to Gaja Capital did not elicit any response.

The background

KKR had pumped in $115 million to acquire a controlling stake in Avendus in 2015 and doubled up with another $55 million in later rounds, taking its total investment in the company to more than ₹980 crore.

According to the people cited earlier, KKR owns a little more than 60% stake in Avendus Capital, and another 17% is held by Gaja Capital and Mahansaria.

Founded in 1999 by Deepak, Vohra and Aggarwal, Avendus group offers investment banking, asset management, NBFC, AIF, equity advisory and other financial services businesses.

As per a March 2024 ratings release by Crisil, Avendus Capital Private Ltd. has a consolidated total income of ₹1,055 crore and net profit of ₹138 crore for fiscal 2023, against ₹1,386 crore and ₹162 crore, respectively, in fiscal 2022.

For the nine months ended 31 December 2023, total income and net profit stood at ₹693 crore and ₹67 crore, respectively. The company acquired Spark Capital to enter the institutional equity business in 2022.

Also read | Allcargo looks to unlock value in Gati, taps Avendus for PE raise

For Mizuho Group, which is looking to expand its presence in the Indian financial services space, the Avendus deal can provide a foot in the investment banking door. With India Inc looking to stitch more deals and raise equity and debt capital, the investment banking business in particular has been lucrative for both domestic and foreign banks.

Mizuho was earlier also said to be evaluating a minority stake purchase in Yes Bank. It pulled out of the race eventually. The Japanese firm, which globally operates in markets such as Europe and the US, is keenly exploring options in the Asian markets, news reports said.