Satin Creditcare may take QIP route to raise Rs200 crore4 min read . Updated: 22 Jul 2016, 04:52 AM IST
Satin Creditcare has initiated talks with investment banks as fund-raising environment gets better for microlenders
Satin Creditcare Network Ltd (SCNL), a Delhi-based microlender, is looking to raise as much as ₹ 200 crore through a qualified institutional placement (QIP), on back of strong growth in the microfinance industry, three people aware of the development said.
A QIP is a sale of securities to institutional investors by a listed company.
“The company has initiated talks with investment banks over the last couple of weeks. They are looking to raise ₹ 150-200 crore through a QIP. Discussions are at an early stage right now," said one of the people cited above, requesting anonymity as the talks are private.
On 30 June, Satin Creditcare informed the stock exchanges that its board had approved raising equity capital of up to ₹ 250 crore.
Satin Creditcare is present in 16 states, with a network of 431 branches serving 1.85 million customers, as on 31 March. In 2015-16, its gross loan portfolio increased by 53% to ₹ 3,270 crore. In that fiscal, the firm’s revenue grew 72% to ₹ 558.5 crore, while its profit increased 83% to ₹ 57.9 crore.
“We have passed an enabling resolution for a capital raise up to ₹ 250 crore through public and/or private offerings and/or on preferential allotment basis, including without limitation through a qualified institutional placement in accordance with applicable regulations. We are evaluating all these options in consultation with our board," the firm said in an email response.
Last week, Mint reported that another listed microfinance institution, Bharat Financial Inclusion Ltd (earlier known as SKS Microfinance Ltd), is in talks with investment banks to help it raise up to ₹ 600 crore through a QIP.
The plans of these microfinance companies indicate that the fund-raising environment for such companies is gaining traction.
On the private side, too, fund-raising has been very active.
Microfinance companies have raised $323 million so far in 2016 from private investors, compared to $298 million in all of 2015, data from Venture Intelligence shows.
Factors such as the stellar initial public offerings (IPOs) of companies from the sector and a run-up in the share prices of listed microfinance companies are driving the fundraising interest, said industry experts.
“The sector, in many ways, has re-acquired its halo. The way the growth numbers are, the way the small finance bank licensing happened, the Bandhan story that is going pretty well, the IPOs of both Equitas and Ujjivan—a lot of things are driving the positive sentiment towards the sector," said Alok Prasad, an independent industry expert and former chief executive of industry body Micro Finance Institutions Network (MFIN).
In April, when Equitas Holdings Ltd went public, its ₹ 2,172 crore IPO was subscribed 17 times. In May, Ujjivan Financial Services Ltd received demand for 40 times the ₹ 885 crore of shares it offered in its IPO.
Ujjivan and Equitas, erstwhile microfinance companies, are now transforming into small finance banks, having received in-principle approval from the Reserve Bank of India in September 2015.
These stocks have climbed significantly from their listing price, richly rewarding investors, reinforcing the positive sentiment among investors for the microfinance sector, the second person said.
Ujjivan’s share prices have almost doubled to ₹ 412.50 from its IPO price of ₹ 210 per share. Equitas shares have risen 58.8% to ₹ 174.7 from its IPO price of ₹ 110.
Firms such as Bharat Financial and Satin Creditcare have also seen strong run-up in their stock price.
Bharat Financial’s shares have risen by almost 56.7% to ₹ 781.7 from ₹ 498.9 at the start of the calendar year, while Satin Creditcare’s share price has increased by 27% to ₹ 500.90 in the same period.
Stock market frenzy aside, the microfinance industry itself has witnessed sharp growth, which too seems to have caught the eye of investors.
In 2015-16, the gross loan portfolio of microfinance institutions rose 84% to ₹ 53,233 crore, from ₹ 28,940 crore in the previous year, according to data from Micrometer, a quarterly report on the sector’s performance.
“Financial inclusion is a strong focus area for this government. It wants to widen and deepen the institutional outreach for the segments that are still being neglected by the mainstream banks. NBFC-MFIs (non-banking financial companies/microfinance institutions) are being seen as a key component of the delivery structure, and the past overhang of political/regulatory risk has largely gone away," said industry expert Prasad.
The Reserve Bank of India’s move to increase the upper cap for microfinance loans to ₹ 1 lakh from ₹ 50,000 has also opened up more avenues of business for these institutions, he added.
However, amidst rising stock prices and growing inflow of money into the sector, there are also concerns about the quality of the growth numbers that the sector is displaying.
On 27 June, Mint reported that microfinance companies have extended heavier loans to their customers in the last financial year, raising concerns that the sector which emerged from a crisis not long ago may be growing too fast for its own good.
The 84% jump in loans came against a much more modest 44% increase in the number of clients, suggesting the average loan per customer is on the rise, according to the Mint report.
The number of branches and employees too have grown much slower during the year, at 22% and 36%, respectively.