Small finance bank licensee Disha’s parent raises Rs500 crore

The investments came from private equity investors TA Associates, True North, Tata Opportunities Fund and LeapFrog Investments


A file photo off Rajiv Yadav, group chief executive officer, Fincare during the Mint Annual Banking Conclave 2016 in Mumbai. Photo: Aniruddha Chowhdury/Mint
A file photo off Rajiv Yadav, group chief executive officer, Fincare during the Mint Annual Banking Conclave 2016 in Mumbai. Photo: Aniruddha Chowhdury/Mint

Mumbai: Fincare Business Services Ltd (Fincare), a financial inclusion platform, on Tuesday announced that it has closed a Rs500 crore transaction with investments from private equity investors TA Associates, True North, Tata Opportunities Fund and LeapFrog Investments.

Fincare is an umbrella holding company, which manages financial services businesses that provide microfinance loans, micro-enterprise loans and bank partnership loans to emerging consumers at the base of the pyramid via its companies: Disha Microfin Ltd, Future Financial Services Pvt. Ltd and Lok Management Services Pvt. Ltd.

Disha Microfin, an erstwhile microfinance institution, is in the process of setting up a small finance bank, which is expected to start operations in April, Mint reported in December.

The transaction, which involves both primary and secondary components, also saw the participation of investors such as SIDBI, Kotak Mahindra Old Mutual Life Insurance Ltd and Edelweiss Tokio Life Insurance.

The company did not disclose the quantum of primary and secondary components and other financial details.

Indium, a fund of India Value Fund Advisors (now known as True North) and an investor in Fincare group of companies since 2010, will remain a shareholder in the platform. Indium owned close to 74% stake in Fincare Business Services prior to the transaction.

Edelweiss Financial Services Ltd acted as the financial advisor to Fincare.

The Fincare platform has witnessed its assets under management (AUM) grow at an annual 79% over the last three years, the statement said. It’s AUM stands at Rs1,735 crore, the statement said.

Its primary product, a joint-liability group loan, reaches over 1.2 million customers, 95% of whom are based in rural areas. The platform operates over 270 offices in seven states in south and west India.

“Today’s announcement will enable us to continue to build the infrastructure required to accelerate our growth, in line with our mission to facilitate a lifetime of progress at the base of the pyramid through financial and social inclusion,” said Rajeev Yadav, group chief executive officer, Fincare.

This investment is testament to the scale of the opportunity for financial inclusion in India, and underscores the ability of Fincare products to drive significant revenue expansion alongside social impact for India’s underserved rural communities, he added.

Disha was one of the 10 institutions that received in-principle approval from the Reserve Bank of India (RBI) in September 2015 to start a small finance bank. The purpose of small finance banks is to expand access to financial services in rural and semi-urban areas. They offer basic banking services, accept deposits and lend to underserved sections of customers, including small business units, small and marginal farmers, micro and small industries, and entities in the unorganized sector.

Other financial institutions that received the RBI’s nod to set up small finance banks are Ujjivan Financial Services Ltd, Equitas Holdings Ltd, Janalakshmi Financial Services Pvt. Ltd, Au Financiers (India) Ltd, Capital Local Area Bank Ltd, ESAF Microfinance and Investments Pvt. Ltd, RGVN (North East) Microfinance Ltd, Suryoday Micro Finance Pvt. Ltd and Utkarsh Micro Finance Pvt. Ltd.

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