A proposed investment of up to ₹800 crore in Arka Fincap could provide the lender with growth capital while reducing Kirloskar Oil Engines Limited’s indirect ownership, though the parent would retain a majority stake.
Arka signed agreements on Nov. 6 for an initial ₹525 crore investment from TPG SG Arca Pte. Ltd., which is investing through TPG’s The Rise Funds, and a possible additional ₹275 crore, according to a filing by Kirloskar Oil Engines with the National Stock Exchange of India.
The first tranche would use equity shares and compulsorily convertible preference shares and is subject to conditions precedent. The possible follow-on would be in preference shares and depends on Arka meeting agreed business milestones and securing regulatory approvals. The filing gives no completion date.
Kirloskar Oil Engines’ indirect stake in Arka is 90.279% on a fully diluted basis before the investment. It would decline to 68.587% after the first tranche and to 62.607% if the second tranche closes, the filing says. The parent would remain a majority shareholder under either scenario. TPG would have the right to appoint one nominee director to Arka’s board once the shareholders’ agreement takes effect.
Arka, a Kirloskar Group-promoted nonbanking financial company registered with the Reserve Bank of India, says it plans to use the capital for geographic expansion and investment in technology and risk management. The company reported about ₹8,000 crore in assets under management, a secured retail portfolio above ₹1,000 crore, 146 branches across 10 states and more than 2,000 employees.
Its lending includes pre-owned vehicle financing, secured business loans and loans against property, as well as wholesale lending. Simit Batra, BU Partner at TPG, said many of India’s small and midsize businesses and vehicle operators “remain underserved by formal financial services.”
The first tranche must meet its conditions precedent before proceeding. The additional investment also requires Arka to meet the specified milestones and obtain applicable regulatory approvals; the filing does not set a timeline.
