KOEL stake in Arka Fincap to fall to 62.607% after TPG deal

Kirloskar Oil Engines Limited (KOEL) said on November 6, 2026 that its fully diluted holding in Arka Fincap Limited (Arka Fincap) will fall to 62.607% if TPG SG Arca Pte. Ltd. (TPG) completes subscriptions worth up to Rs 800 crore. The proposed investment comprises a Rs 525 crore first tranche and a Rs 275 crore second tranche.

What are TPG’s subscription terms for Arka Fincap?

TPG is proposed to subscribe to equity shares and compulsorily convertible preference shares, or CCPS, in Arka Fincap in two tranches under a securities subscription agreement dated November 6, 2026. The first tranche comprises 100 equity shares and 32,53,45,231 CCPS for an aggregate consideration of Rs 525 crore and Rs 3, subject to specified conditions precedent.

The second tranche comprises 12,93,34,496 CCPS for an aggregate consideration of Rs 275 crore and Rs 588. It depends on Arka Fincap meeting agreed business milestones and receiving applicable regulatory approvals, with the filing not specifying those milestones, approvals, subscription prices or a completion date.

The shareholders’ agreement was signed on November 6, 2026 by KOEL, Arka Fincap, Arka Financial Holdings Private Limited (AFHPL) and TPG. AFHPL is wholly owned by KOEL, while Arka Fincap is a step-down subsidiary of KOEL; TPG is described as a financial investor that is not related to KOEL’s promoter, promoter group or group companies.

How will TPG’s investment change KOEL’s Arka Fincap stake?

KOEL’s fully diluted Arka Fincap holding is expected to decline from 90.279% before the subscriptions to 68.587% after the first tranche and 62.607% after the second tranche. KOEL holds its Arka Fincap interest through AFHPL, in which it currently owns 100% of the equity shareholding.

The first tranche would lower KOEL’s disclosed stake by 21.692 percentage points, while the second would reduce it by a further 5.980 percentage points. Across both tranches, the disclosed holding would decline by 27.672 percentage points, although KOEL would retain a stake above 50% at 62.607%.

KOEL said the shareholders’ agreement has no impact on its management or control. It also said the agreement grants TPG no rights relating to KOEL’s board, management or shares, distinguishing the Arka Fincap investment from any governance role at the listed parent.

What governance rights will TPG receive in Arka Fincap?

TPG will have the right to appoint one nominee director to the Arka Fincap board once the first-tranche subscription is completed. The shareholders’ agreement becomes effective only on completion of that first tranche, rather than simply when it was signed on November 6, 2026.

The agreement contains governance provisions, minority-protection rights including certain reserved matters, rules on alterations of share capital, transfer restrictions and exit rights. KOEL did not disclose the individual reserved matters, the duration of transfer restrictions or the terms on which any exit rights could be exercised.

KOEL has accepted customary restrictions on directly or indirectly transferring its Arka Fincap shareholding. KOEL and its affiliates also agreed that the group’s non-banking financial company, or NBFC, lending business will be carried on exclusively through Arka Fincap, subject to carve-outs that were not detailed in the November 6 disclosure.

What business will the new capital support at Arka Fincap?

Arka Fincap said the proposed capital will support deeper geographical reach and investment in technology and risk-management capabilities. Its stated objective is to build a scaled, diversified and secured retail-led financial institution while continuing to use its established wholesale lending platform.

Arka Fincap reported assets under management, or AUM, of about Rs 8,000 crore, including secured retail assets exceeding Rs 1,000 crore. The secured retail portfolio is therefore a disclosed component of an AUM base that also includes its wholesale lending platform and other financing products.

The NBFC operates across 10 states through 146 branches and has more than 2,000 employees. Its product range includes pre-owned vehicle financing, secured business loans, loans against property and wholesale lending for entrepreneurs, micro, small and medium enterprises, vehicle operators and corporate clients.

Arka Fincap was established in 2018 and said it had spent the preceding 18 months strengthening its leadership, building a pan-regional distribution network and incubating secured-lending businesses. The company is registered with the Reserve Bank of India and is rated CRISIL AA/Stable, according to the November 6 press release.

What must happen before the full Rs 800 crore investment is completed?

The full potential investment requires separate conditions for each of the two tranches. The Rs 525 crore first tranche is subject to conditions precedent, while the Rs 275 crore second tranche additionally requires agreed business milestones and applicable regulatory approvals.

Completion of the first tranche is the event that activates the shareholders’ agreement and TPG’s right to appoint one Arka Fincap nominee director. Completion of the second tranche would take KOEL’s fully diluted holding from 68.587% after the first subscription to 62.607%.

TPG’s The Rise Funds, described as its multi-sector global impact investing strategy, is the platform identified in the press release. Arka Fincap said its secured retail portfolio had exceeded Rs 1,000 crore and that the funds are intended to accelerate secured retail lending, technology and risk-management investment.

Conclusion

The transaction would introduce TPG as an outside financial investor in Arka Fincap through subscriptions of up to Rs 800 crore. KOEL’s fully diluted ownership would move from 90.279% to 62.607% if both tranches complete, while the filing says TPG receives no rights over KOEL’s board, management or shares.

The immediate event to watch is completion of the first-tranche conditions, which would make the shareholders’ agreement effective and permit one TPG nominee director at Arka Fincap. The later Rs 275 crore subscription remains tied to agreed business milestones and regulatory approvals that KOEL did not identify in its November 6, 2026 filing.