Kirloskar Oil Engines Limited (KOEL) announced its Board of Directors has approved the execution of a Shareholders’ Agreement (SHA) with Arka Fincap Limited (AFL). This agreement formalizes TPG SG Arca Pte. Ltd.’s proposed investment in AFL, a step-down subsidiary of KOEL. The investment aims to accelerate Arka Fincap’s growth and retail transformation into a diversified financial institution. Details of the investment, including shareholding changes, are outlined in the accompanying press release.
Board Approves Strategic Investment
The Board of Directors of Kirloskar Oil Engines Limited (KOEL) has officially approved the execution of a Shareholders’ Agreement (SHA). This agreement pertains to the proposed investment by TPG SG Arca Pte. Ltd. (referred to as ‘TPG/Investor’) in Arka Fincap Limited (AFL), a step-down subsidiary of KOEL. The SHA aims to record the inter-se rights and obligations of AFL, KOEL, Arka Financial Holdings Private Limited (AFHPL – a wholly owned subsidiary of KOEL), and TPG in relation to AFL, in their capacities as shareholders of AFL. The agreement was executed on November 6, 2026, following the Board’s approval.
Investment Details and Impact
This strategic move is part of TPG’s investment aimed at accelerating Arka’s growth and its transformation into a scaled, diversified, and secured retail-led financial institution. The press release accompanying this disclosure highlights that Arka has built an Asset Under Management (AUM) of approximately INR 8,000 crore, with a secured retail portfolio exceeding INR 1,000 crore. The investment from TPG comprises an initial amount of INR 525 crore, with a potential for an additional INR 275 crore in a subsequent tranche, subject to business milestones and regulatory approvals.
Following the investment, KOEL’s shareholding in AFL, through its subsidiary AFHPL, will change. Currently, KOEL holds 100% in AFHPL, which in turn holds 90.279% of AFL on a fully diluted basis. After the first tranche of subscription, KOEL will hold 68.587% of AFL, and after the second tranche, it will hold 62.607% on a fully diluted basis.
Key Terms and Governance
The SHA will become effective upon the completion of TPG’s subscription to the first tranche of securities. Key provisions include customary governance arrangements, such as the Investor’s right to appoint one nominee director, minority protection rights, and clauses related to share capital, transfer restrictions, and exit rights. The execution of the SHA does not impact the management or control of KOEL, nor does it grant the Investor any rights concerning KOEL’s board, management, or shares.
Share Issuance
In connection with the investment, there will be an issuance of shares to the parties. For the first tranche, 100 equity shares and 32,53,45,231 compulsorily convertible preference shares will be issued for an aggregate consideration of INR 525,00,00,003. The second tranche involves the issuance of 12,93,34,496 compulsorily convertible preference shares for an aggregate consideration of INR 275,00,00,588.
Related Parties and Business Impact
The Investor is not considered related to the promoter, promoter group, or group companies of KOEL. KOEL has agreed to customary restrictions on the transfer of its shareholding in AFL and has also committed, along with its affiliates, that the group’s NBFC lending business will be conducted exclusively through AFL. This strategic partnership is expected to enhance Arka’s capabilities and market position in the secured lending sector.
Source: BSE
