Brazil's Pravaler raises BRL 176 million in credit rights to finance Brazilian students

In its second issue of the year, Pravaler intends to finance students who started their studies at private universities in the second half of 2021

Pravaler's HQ. Photo: Courtesy/Pravaler
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  • The company’s goal is to finance 1 million students with BRL 10 billion;
  • To date, Pravaler has already funded 180,000 students with BRL 4 billion.

Brazilian education financing platform Pravaler announced on Tuesday that it has completed an issue of BRL 176 million in FIDCs (Brazilian acronym for Credit Rights Investment Fund), a type of fund composed of receivables of different kinds of issuers widely used in the Brazilian credit market, to offer financing to college students this in this 2021’s second half.

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“We believe that FIDCs work well because there is the structure of subordinated quotas and senior quotas, so our investors can participate with a risk shield since the subordinated quotas are Pravaler quotas that offer the guarantee for senior investors,” explains Haroldo Carvalho, CFO of Pravaler.

Haroldo Carvalho, CFO at Pravaler. Photo: Courtesy

“Less than ten investors” participated in the new issue, according to Carvalho, who says Pravaler has an easy time raising capital because investment firms know the credit history of the students funded by the company. Traditionally, Pravaler makes two issues per year according to the volume of students to be funded.

The credit risk rating has been considered a “low risk of operations” by S&P Global Ratings. The rates of this issue were between 2.4% and 3.3%, with a maximum maturity of 84 months.

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This year alone, Pravaler raised almost BRL 200 million in the first six months, of which BRL 180 million came from FIDCs issued in March and BRL 20 million in debentures for financing students who joined universities at the beginning of the year.

For this FIDC, Pravaler has already made 26 issues. Each issue has different profitability for the investor according to the moment of the market and the term of the issue, according to Carvalho. It is important to remember that in Brazil, only professional investors can invest in FIDCs. “We use FIDCs as a leverage for our business and our growth agenda”, says Carvalho.

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The company has been in the market for almost 20 years and has Brazil‘s big bank Itaú among its main shareholders. Therefore, raising capital through venture capital is not in Pravaler’s strategy, since the company generates profit. With revenues of BRL 250 million and more than 300 employees, Pravaler has the goal of financing one million students by 2025 with BRL 10 billion.

Pravaler is expected to return to the market for a new FIDC issue later this year or early 2022 to finance students starting university in the summer in Brazil.

To date, Pravaler has funded 180,000 students and R$4 billion of the portfolio has already been financed. “This issue will help us in the second semester, which has been a better semester in terms of demand,” says Carvalho.

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With the advance of vaccination, the demand for in-person graduation has grown again, according to the CFO. “If we compare the first months of this year with what it was last year, we have a growth of more than 50% in new students. The market is reacting well, some surveys show students well encouraged to go back for universities.”

According to Carvalho, Brazil still has an average of universities’ students (21%) lower than OECD (Organisation for Economic Co-operation and Development) countries, with 44%. Pravaler’s business model bets on the growth of the private college education market and the repressed demand for graduation in the year 2020.

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“Last year was tough in terms of education prospects, with many students having to leave college due to financial difficulties or even postpone their dream of graduating. 2021 comes with other perspectives, with financing as a tool that is being very well used, even because the public sector has decreased its presence and the private sector has been growing a lot.”

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