In a significant move poised to reshape India’s non-banking financial sector, leading global and domestic private equity (PE) firms — including Blackstone, Kedaara Capital, Advent International, and Warburg Pincus — are reportedly in advanced discussions to acquire a substantial stake in Axis Finance, the non-banking financial subsidiary of Axis Bank. According to people familiar with the matter, these firms are considering acquiring anywhere from a 40% to a full 100% stake, with valuations ranging between $800 million and $1 billion.
Strategic Intent: RBI Push Spurs Divestment
Axis Bank, India’s third largest private sector lender, initiated this sale to comply with evolving regulatory guidelines proposed by the Reserve Bank of India (RBI). The central bank has mandated that scheduled commercial banks must reduce their stake in non-banking subsidiaries to 20% or less within two years. The move aims to mitigate systemic risks and ensure that banks do not overly expose themselves through complex group structures.
Previously, Axis Group explored alternative routes such as an IPO or a reverse merger to address compliance needs. However, given execution challenges, a direct sale has emerged as the preferred option. Morgan Stanley is spearheading the sale process on behalf of Axis Bank.
Due Diligence and Valuation: A Closer Look
The interested private equity firms are currently conducting rigorous due diligence. Binding offers are expected by the end of September, marking a crucial milestone in the deal’s timeline.
Industry insiders note that Axis Finance could command a valuation of up to $1 billion, reflecting both its diversified lending portfolio and robust operational metrics.
Axis Finance’s Business Footprint
Axis Finance has evolved into a formidable player in the NBFC space, leveraging Axis Bank’s strong brand and distribution network. Its lending book is broad-based, encompassing corporate loans, real estate financing, collateralised lending, emerging corporate lending, and retail loans.
Within retail, it offers products like loans against property, business loans, salaried personal loans, and home loans — all strategically distributed through Axis Bank’s extensive presence in Tier I and Tier II cities.
As per a Brickwork Ratings release in February 2025, Axis Finance’s assets under management (AUM) stood at ₹36,962 crore as of 31 December 2024. The book was well-diversified: 47% retail, 44% wholesale, 6% MSME, and 3% treasury assets.
Financial Strength: Healthy Fundamentals
Axis Finance boasts strong capital and asset quality indicators. The capital adequacy ratio (CRAR) rose to 21.22% in December 2024, from 19.11% in March 2024. Its gross non-performing assets (GNPA) ratio stood at a low 0.65%, while net NPAs were at 0.33%, reflecting prudent risk management and effective underwriting practices.
In terms of profitability, the company reported revenue of ₹3,014 crore for the nine months ending December 2024 — nearly matching its full-year FY24 revenue of ₹3,154 crore. Profit after tax for this nine-month period was ₹494 crore, compared to ₹597 crore in FY24.
Rising PE Interest in Lending
The Axis Finance transaction is unfolding against a backdrop of surging private equity interest in Indian lending businesses. Recent examples include EQT and ChrysCapital’s $1.15 billion acquisition of HDFC Credila, and TPG’s ₹3,900 crore purchase of Poonawalla Housing Finance.
The RBI’s push to reduce concentration risks and ensure cleaner corporate structures has created attractive acquisition opportunities for private investors eager to tap into India’s growing credit demand, especially in retail and SME sectors.
Looking Ahead: What This Means for the Sector
Should this deal close successfully, it will signal another chapter in the transformation of India’s non-banking financial ecosystem. For Axis Bank, it paves the way for greater regulatory compliance and balance sheet efficiency. For private equity players, it offers a gateway to a well-established NBFC platform with a strong growth trajectory, leveraging a trusted brand and a large customer base.
As due diligence concludes and binding offers come in over the next few months, all eyes will be on how valuations shape up — and which of the heavyweight bidders emerges victorious in this high-stakes financial chess game.
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Disclaimer
This article should not be interpreted as investment advice. For any investment decisions, consult a reputable financial advisor. The author and publisher are not responsible for any losses incurred by investors or traders based on the information provided.