Target Information

Partners Group has successfully exited its investment in Aavas Financiers, an Indian affordable housing lender, by selling its remaining stake to CVC Capital Partners. This transaction concludes a highly fruitful investment cycle for Partners Group, yielding substantial returns for its clients.

Partners Group initially invested in Aavas in 2016, aiming to establish India’s first private equity-controlled housing finance company. The firm's substantial commitment to Aavas culminated in the company's listing on the Bombay Stock Exchange and the National Stock Exchange of India in 2018, after which Partners Group systematically reduced its stake.

Industry Overview in India

India's affordable housing sector is characterized by a growing demand for housing finance, primarily driven by a significant segment of underserved and unbanked borrowers. Aavas focuses on providing loans with an average size of about $11,000, catering specifically to low- and middle-income salaried and self-employed individuals across its extensive network of 397 branches located in 14 states and union territories.

The Indian housing finance market has witnessed remarkable transformations in recent years, with increasing private sector involvement to bridge the financing gap for affordable housing. Government initiatives aimed at promoting housing for all have further bolstered this sector's growth, creating ample opportunities for financial institutions focused on affordable lending solutions.

Furthermore, the macroeconomic environment has posed various challenges, including a liquidity crisis and impacts from the COVID-19 pandemic. Yet, despite these difficulties, companies such as Aavas have effectively adapted, thereby reinforcing their positions as leaders in this sector.

From FY2016 to FY2025, Aavas has thrived, shown by its asset growth soaring more than twelvefold to over INR 204 billion, while net income has increased approximately eighteenfold to INR 5.7 billion. Throughout this period, Aavas also significantly improved its asset quality, reducing the proportion of loans past due by over 165 basis points to 3.4%.

Rationale Behind the Deal

The rationale for Partners Group’s exit from Aavas is primarily rooted in the successful value creation initiatives implemented during its ownership. Key strategies included digitizing operations, broadening product offerings, accelerating the establishment of new branches, and enhancing the management team. These changes positioned Aavas to successfully navigate various macroeconomic challenges and emerge as a resilient market leader in affordable housing finance.

The strong financial performance and growth trajectory also provided a compelling opportunity for Partners Group to realize gains from its investment at a strategically opportune moment, as the demand for affordable housing solutions continues to rise in India.

Investor Information

Partners Group is a prominent global private markets investment firm, known for its extensive investments across various sectors and geographies. With over $78 billion in global private equity assets under management, the firm has been actively investing in India, having directed $2.3 billion into the local market to date.

Over the years, Partners Group has showcased a commitment to building long-term value in its portfolio companies, and their successful exit from Aavas Financiers reflects its strategic approach and expertise in the financial services sector, particularly in emerging markets.

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From an expert perspective, the exit of Partners Group from Aavas Financiers marks a well-executed investment that embodies transformational value creation in the Indian financial sector. The significant returns generated through strategic initiatives not only benefit Partners Group’s clients but also signify Aavas's strengthened market position.

The emphasis on digitization and expansion made Aavas a compelling investment, enabling it to withstand various economic challenges and emerge stronger. The firm’s capability to substantially grow its assets and improve profitability amidst adversity underlines its robust operational model.

Moreover, as India continues to present vast opportunities within the affordable housing segment, the exit is not only timely but positions Aavas and its new stakeholder, CVC Capital Partners, favorably for future growth potential in a rapidly expanding market.

In conclusion, this deal illustrates the successful culmination of Partners Group’s investment strategy and highlights the importance of proactive management and adaptability in navigating the complexities of the financial services landscape.

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