New Delhi, July 16 -- Homegrown private equity firm ChrysCapital is exiting a financial services company that it backed around eight years ago with barely any returns on its investment.

The PE firm, which made a partial exit from a healthcare company last month with strong returns and has set the stage for another blockbuster liquidity move, will sell its entire stake in Bengaluru-based non-bank lender Varthana Finance Pvt Ltd as part of a larger transaction.

Varthana Finance is being acquired by TVS Holdings Ltd unit Home Credit India Finance Pvt Ltd for Rs 967 crore (around $100 million). The transaction is subject to approval from the Reserve Bank of India and may take around nine months to complete, TVS Holdings said in a disclosure to stock exchanges.

TVS Holdings, part of the TVS Venu group, will strengthen its position in India's financial services sector with this acquisition. The deal will also enable it to diversify its portfolio, improve business mix, and create opportunities to leverage operating, distribution, technology and risk-management synergies.

ChrysCap's investment

ChrysCapital first invested in Varthana, an education-focused lender earlier known as Thirumeni Finance, in 2018. The PE firm led a Rs 350-crore (around $55 million) Series C funding round at the time. Varthana's existing investors Elevar Equity, Omidyar Network, Lightrock and Kaizen Private Equity also participated in the round.

ChrysCapital invested a total of Rs 228.6 crore (around $35 million then), comprising a primary infusion of about Rs 160 crore and a secondary purchase of shares for Rs 68.6 crore, according to regulatory disclosures reviewed by VCCircle. The deal valued the non-bank lender around Rs 870-880 crore ($134.5 million) on a post-money basis, according to VCCEdge.

In 2021, Varthana raised Rs 105 crore from ChrysCapital and other investors. The PE firm invested Rs 38.4 crore ($5 million) in this round, which valued Varthana around Rs 960 crore on a post-money basis.

ChrysCapital is now likely to harvest around Rs 285-290 crore (about $30 million) by selling its stake, back-of-the-envelope calculations show. This indicates that it would book a small annualised return of less than 1% in rupee terms but a loss of around 30% in dollar terms, the calculations show.

For perspective, PE and VC investors typically chase an IRR of at least 20% at the fund level in local currency and 15% in US dollars.

Varthana refrained from commenting on specifics of the deal. ChrysCapital did not respond to queries at the time of publishing this article.

Steve Hardgrave, wholetime director and executive vice chairman of Varthana, told VCCircle Home Credit India is the right partner for the lender because of their "shared commitment to building trusted, customer-centric institutions".

"Their scale, deep operational expertise and access to capital will strengthen our platform, enabling us to reach more schools, offer better financing solutions and amplify our impact across the affordable education ecosystem," he added.

Background

Varthana started operations in January 2013 after promoters Hardgrave and Brajesh Mishra acquired an erstwhile non-bank lender. The company provides loans to affordable private schools so that they can expand their infrastructure, invest in teacher-training and introduce new learning methods into their classrooms. On the student loan front, the company provides loans for undergraduate and postgraduate degrees, certification courses, and pre-university degrees.

Earlier this year, the company raised $16.5 million through a mix of international debt instruments to drive growth in the school financing portfolio. The company raised these funds from WaterEquity, Symbiotics, and Triple Jump.

The company's net profit fell to Rs 273 crore in the first half of FY26 from Rs 580 crore a year earlier, due to a rise in total expenses. Impairment on financial assets, which measures expected credit losses, tripled year-on-year to Rs 2,483 crore in the half year ended September 30, official data showed. The company's gross stage-3 asset ratio rose to 2.5% as of September 30 from 1.9% at the end of FY25.

Published by HT Digital Content Services with permission from VC Circle.