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Varthana Finance to raise Rs 116 crore from Swiss investor Blue Earth Capital

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ChrysCapital-backed school financier Varthana Finance is in the process of raising Rs 116 crore debt from Swiss impact investor Blue Earth Capital while it plans to raise Rs 350 crore equity next fiscal to expand business.

The debt fund will be raised at 12.85% all-embedded cost including hedging cost, Varthana co-founder and executive director Steve Hardgrave told ET. The fund is raised for 48 months. The firm’s average cost of borrowing was a little over 13%.

The company said it will use the fresh fund to finance classroom infrastructure in private schools.

This is Varthana’s second debt raising from overseas investors this fiscal. The Bengaluru-based lender has mobilised three-fold more debt this fiscal so far while it is targeting over 60% annual growth to reach around Rs 1,500 crore, from Rs 923 crore at the end of March 2023.

Hardgrave said that Blue Earth Capital disbursed the first tranche of Rs 58 crore in the last week of December last year and the final tranche is expected by March.

Founded by Brajesh Mishra and Hardgrave in 2013, Varthana provides loans to private school owners that cater largely to middle and lower income groups for expanding classroom infrastructure and investing in teacher-training. Its lending rate ranges between 15% and 25% a year. Its assets under management currently stood at Rs 1200 crore. This includes Rs 150 crore of education loans given to students for higher studies, a vertical it started recently. It has raised Rs 600 crore of debt in the first nine months of the fiscal and may end up raising another 250-300 crore by end of March. A majority of the borrowings come from non-banking finance companies. Last fiscal, it had borrowed just about Rs 212 crore.

On equity raising, the company is planning to start the process after March. Existing institutional investors including Elevar Equity, Kaizenvest, LGT Impact, Omidyar Network India hold about 80% in Varthana. The home grown private equity firm Chrys Capital Advisors is the largest investor with 28% interest.

The lender operates in 16 states through 40 branches. Hardgrave said it would go deeper in the states it already operates before venturing into new geographies.

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