In a major development in India’s financial services landscape, the consortium of Kedaara Capital and the International Finance Corporation (IFC) — the World Bank Group’s private sector investment arm — has emerged as the lead contender to acquire a minority stake in Axis Finance, the non-banking finance arm of Axis Bank, as per an industry report.
The deal, now in its final negotiation stage, is expected to be signed in the coming weeks, paving the way for the much-anticipated Axis Finance IPO.
Axis Finance IPO: Final Lap in the Race
Kedaara Capital and IFC have edged ahead of other suitors, including Blackstone, Advent International, and EQT, which were part of the early bidding pool as of July 2025.
While the deal size and valuation remain undisclosed, people familiar with the matter suggest that the transaction will involve the sale of a minority stake, likely around 20%, valued at INR 3,000–3,300 crore (USD 350–400 million).
The report indicates that the proposed transaction is scaled down from an earlier plan to sell up to 50% of Axis Finance for USD 800M – USD 1B. The smaller stake sale now aligns better with Axis Bank’s strategic objective of raising growth capital while retaining control ahead of the subsidiary’s market listing.
Axis Finance IPO: Preparing for the Next Leap
Axis Bank Managing Director & CEO Amitabh Chaudhry confirmed during the lender’s Q2 FY26 earnings call that the Axis Finance IPO process is “very much on”. He emphasised that the company’s scale now positions it to be designated as an “upper-layer NBFC”, under the Reserve Bank of India’s (RBI) revised scale-based regulatory framework.
“Axis Finance would become an upper-layer NBFC very soon, given the size of its AUM. That will also mean that we will ultimately get on this path of listing it at some stage in the future,” Chaudhry said.
The upper-layer classification, applicable to large systemically important NBFCs, mandates public listing within three years of notification, bringing Axis Finance closer to peers like Bajaj Finance and Tata Capital in terms of regulatory oversight and market stature.
Robust Financials Drive Investor Interest
Axis Finance’s balance sheet strength and consistent growth have been central to attracting marquee investors. As of 30 September 2025, the company reported:
- Assets under management (AUM): INR 43,012 crore, up 23% year-on-year.
- Retail loan book growth: 24% YoY, with retail and MSME now comprising 55% of the total portfolio.
- Capital adequacy ratio: 19.82%, reflecting robust capitalisation.
- Net NPA: a low 0.42%, indicating strong asset quality.
- H1 FY26 profit after tax: INR 385 crore, up 18% from INR 327 crore in H1 FY25.
Earlier, for FY25, Axis Finance had reported a PAT of INR 676 crore and AUM of INR 39,000 crore, contributing nearly 38% of Axis Bank’s subsidiary earnings.
Regulatory Clarity Fuels Momentum
The ongoing transaction comes against a backdrop of regulatory relief from the RBI, which recently removed restrictions on overlaps between banks and their NBFC subsidiaries. The regulator stated that the revised framework aims to “streamline activities while providing operational freedom” to banks and their financial holding companies — a move widely welcomed by lenders such as Axis Bank.
This policy shift has revived investor confidence and accelerated deal discussions, which had previously slowed amid uncertainty surrounding the RBI’s earlier draft “Forms of Business” circular.
Strategic Capital Raise for Growth
Axis Bank’s strategy to partially monetise Axis Finance serves dual objectives: to unlock value from its fast-growing NBFC arm and to secure growth capital amid RBI limits on fresh bank equity infusions into subsidiaries.
“Axis Finance is growing quite well, and it has its capital requirements. We need to ensure, as the owner of Axis Finance, that it gets capital at the right time,” Chaudhry noted, emphasizing the bank’s disciplined approach to capital allocation.
With the forthcoming stake sale, Axis Finance would not only shore up its capital base but also enhance governance visibility ahead of its planned public listing, potentially making it one of the most closely watched NBFC IPOs in the coming year.
M&A Buzz in Financial Services
The Axis Finance transaction is part of a larger wave of consolidation and capital-raising activity across India’s financial sector:
- Emirates NBD’s USD 3 billion acquisition of a 60% stake in RBL Bank marked the largest-ever foreign direct investment in Indian banking.
- Blackstone’s INR 6,200 crore investment for a 9.9% stake in Federal Bank via preferential warrants was announced earlier this month.
- Abu Dhabi’s IHC acquired 43% of Sammaan Capital (formerly Indiabulls Housing Finance) for about USD 1 billion.
- Sumitomo Mitsui Banking Corporation (SMBC) picked up a 20% stake in Yes Bank, becoming its largest shareholder.
The Axis Finance-Kedaara-IFC deal, while smaller in quantum, is strategically significant — highlighting renewed private equity interest in India’s non-bank lending space, particularly in well-governed, high-growth platforms aligned with RBI’s evolving regulatory clarity.
Outlook
If concluded successfully, the Kedaara-IFC investment will anchor Axis Finance pre-IPO phase, setting the tone for one of the most anticipated financial services listings in 2026. The deal underscores the increasing convergence of private equity and development finance capital in India’s NBFC sector, reflecting confidence in the country’s credit growth trajectory and regulatory stability.
Axis Finance’s strong fundamentals, prudent risk management, and the parent bank’s backing position it to emerge as a listed powerhouse — one poised to capture the next phase of India’s lending expansion story.
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