Kirloskar Oil Engines Limited (KOEL) announced that its subsidiary, Arka Fincap Limited, has entered into definitive agreements for a strategic investment from TPG’s The Rise Funds. This investment includes an initial INR 525 crore, with a potential additional INR 275 crore. The funds will accelerate Arka’s growth in secured retail lending and its evolution into a diversified financial institution.
Strategic Investment in Arka Fincap
Kirloskar Oil Engines Limited (KOEL) has announced that its subsidiary, Arka Fincap Limited (Arka), has signed definitive agreements with TPG’s The Rise Funds for a strategic investment. This landmark deal is set to significantly bolster Arka’s growth trajectory in the secured retail lending sector.
Investment Details and Objectives
The investment comprises an initial amount of INR 525 crore, with a provision for an additional INR 275 crore in a subsequent tranche. These funds are contingent upon the achievement of specific business milestones and requisite regulatory approvals. The primary objective is to support Arka’s ambition to build a scaled, diversified, and secured retail-led financial institution.
Arka Fincap’s Current Standing
As of the announcement, Arka has established itself with Assets Under Management (AUM) of approximately INR 8,000 crore, featuring a secured retail portfolio exceeding INR 1,000 crore. The company operates across ten states with a network of 146 branches and employs over 2,000 individuals. Arka is rated CRISIL AA/Stable, backed by the institutional strength of the Kirloskar Group through KOEL.
Impact of TPG’s Investment
TPG’s investment is expected to provide crucial growth capital, enabling Arka to deepen its geographical reach and accelerate investments in technology and risk management capabilities. TPG’s extensive experience in building and scaling financial institutions, combined with the Kirloskar Group’s deep market understanding, positions Arka to capitalize on the growing opportunities within India’s secured lending market. The agreement signifies a significant step in Arka’s evolution since its inception in 2018.
Execution of Shareholder’s Agreement
In connection with this investment, Kirloskar Oil Engines Limited, Arka Fincap Limited, Arka Financial Holdings Private Limited (a wholly owned subsidiary of KOEL), and TPG SG Arca Pte. Ltd. (TPG/Investor) have executed a Shareholders’ Agreement (SHA). This agreement outlines the inter-se rights and obligations of the parties as shareholders of Arka.
Shareholding Changes
Currently, KOEL holds 100% equity in AFHPL, which in turn holds 90.279% of Arka’s equity on a fully diluted basis. Following TPG’s investment, KOEL’s shareholding in Arka, through AFHPL, is expected to reduce to 68.587% after the first tranche and further to 62.607% after the second tranche.
Source: BSE
