New Delhi, Nov. 7 -- Private equity firm TPG's impact investing arm, The Rise Funds, has struck a deal to invest as much as Rs 800 crore ($85 million) in Arka Fincap Ltd, a non-banking financial company that's part of the Kirloskar Group.

TPG will initially invest Rs 525 crore and provide another Rs 275 crore subsequently, subject to the achievement of certain business milestones aligned with Arka's growth strategy, according to a media statement.

Arka, started in 2018, is a subsidiary of Kirloskar Oil Engines Ltd. The Mumbai-listed maker of diesel engines and generator sets currently holds a 100% stake in Arka Financial Holdings Pvt Ltd and, through Arka Financial, owns a 90.279% stake in Arka Fincap on a fully diluted basis.

Kirloskar Oil's stake in Arka Fincap will fall to 68.587% after TPG's first tranche of investment and further to 62.607% after the second tranche on a fully diluted basis, the company said in a stock-exchange filing.

Arka said it will use the growth capital from TPG to expand its secured retail lending businesses, deepen its geographical reach and accelerate investments in technology and risk management capabilities.

The lender said it is building "a broader and more granular lending franchise", while continuing to leverage its established wholesale lending platform.

Arka operates in pre-owned vehicle financing, secured business loan, loan against property and wholesale lending segments. It caters to entrepreneurs, MSMEs, vehicle operators and corporate clients. The company has assets under management of about Rs 8,000 crore, with its secured retail portfolio exceeding Rs 1,000 crore. It has a network of 146 branches across ten states and over 2,000 employees.

TPG said the investment reflects The Rise Funds' approach to partnering with "growth-stage, mission-driven companies" with the potential to deliver "meaningful impact" at scale alongside strong performance. Arka's growing presence in vehicle financing and secured lending to small businesses provides an opportunity to expand access to formal credit among entrepreneurs and vehicle operators, the PE firm said.

Avendus Capital acted as the exclusive financial advisor and AZB & Partners acted as legal advisors to Arka on the transaction. Cyril Amarchand Mangaldas acted as legal advisors to TPG on the transaction.

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