Mumbai: Cochin-based NBFC group ManappuramNSE -0.46 % is seeking to bring on board a private equity investor for its small loans business – Asirvad Microfinance.
The group has appointed global investment bank Credit Suisse to look for investors and is in talks with leading private equity players to raise $100 million, said three people with direct knowledge of the deal.
“The company is looking to sell a significant minority stake in this unlisted subsidiary,” said an investment banker with knowledge of the plans. In February 2015, Manappuram had acquired 71.14% in Chennai-based Asirvad for Rs 48.63 crore in an all-cash transaction.
After this, Manappuram kept on acquiring stakes in instalments by infusing capital in the business. The company subscribed to a rights issue and brought its stake in the company to 93.3%, Manappuram said in a press release earlier this month.
Information memoranda (IM) seeking interest from private equity investors were sent out in March, and based on the initial interest, the company is now in talks with several investors. “The company is being valued around $300-350 million and they are looking at selling up to 35% stake in the company,” another person aware of the valuation exercise said.
The company will use the proceeds to expand its existing portfolio and widen its brand network, sources said.
“The recent capital infusion by the parent company Manappuram will enable Asirvad’s portfolio grow from the present level of Rs 3,800 crore to over Rs 5,500 crore by March 2020,” Raja Vaidyanathan, founder managing director, Asirvad Mircofinance, was cited as saying in the press release issued earlier this month.
Manappuram declined to comment. Started in 2007, Asirvad now caters to 1.8 million women members through a network of 940 branches across 22 states.
For Manappuram, one of the largest gold-loan providers in the country, Asirvad is the second-biggest profit generator in the group. The microfinance business provides it a much-needed diversification and the group intends to expand the business with the help of a private equity investor. “The PE investor will bring in the deep pockets to take the company to the next level of growth,” the first person cited above said.
PE investors have been attracted to small finance and microfinance companies with sizeable network as they offer proxy exposure to India’s banking sector.
According to the February 2019 statement by the Microfinance Institutions Network, the industry is growing at a breakneck speed.