Mumbai: Kedaara Capital-backed microfinance institution Spandana Sphoorty Financial Ltd has initiated talks with investment banks for an initial public offering (IPO), said three people aware of the development.

Spandana, set up in 2003, is engaged in the business of providing small-ticket unsecured loans to women from low-income households in rural and urban areas.

The lender provides business loans, income-generation loans and loans against gold jewellery.

The proposed IPO could see the microfinance company raise as much as Rs1,000 crore, said one of the three people cited above, requesting anonymity as he is not authorized to speak to reporters.

“Spandana has initiated talks with investment banks for its IPO, which they are looking to do in the current calendar year. They are expected to soon appoint banks for this purpose. The company could raise around Rs1,000 crore, which is likely to be majorly a primary fund-raise for funding the lending institution’s growth," he said.

Emails sent last week to Padmaja Reddy, managing director at Spandana and Manish Kejriwal and Sunish Sharma, managing partners at Kedaara Capital did not elicit any response.

The IPO will mark a major milestone in the turnaround story of Spandana which had entered corporate debt restructuring (CDR) in 2010 following the Andhra Pradesh microfinance crisis.

Last year, Spandana raised $270 million in funding, facilitating its exit from the CDR after seven years, Mint reported.

Around $100 million came in the form of equity capital from a Kedaara Capital-led consortium including Ontario Teachers’ Pension Plan, and the rest in the form of debt capital from IndusInd Bank Ltd, Yes Bank Ltd and ICICI Bank Ltd. Kedaara, a homegrown private equity fund, picked up a 55% stake in the micro-lender.

Spandana was one of five micro-finance firms referred to the CDR cell after the crisis the micro-finance industry faced in Andhra Pradesh.

In 2010, Andhra passed a law tightening rules for the industry after reports of coercive loan-recovery practices leading to suicides among overextended borrowers triggered a wave of loan defaults in the state. Andhra Pradesh was then the biggest market for micro-lenders.

Spandana had a total loan portfolio of Rs4,500 crore before the 2010 crisis, of which close to 50% was tilted towards Andhra Pradesh. After two years of straight losses, the micro-finance lender made its first profit of Rs60 crore in 2013-14.

As of 30 September, Spandana had a loan portfolio of Rs2,244 crore and 586 branches spread across 14 states, serving 1.15 million customers, according to data from the company’s website.

Spandana’s plans to go public come at a time when the Indian initial public offering market has witnessed a record year of fund-raising. In 2017, 36 companies raised Rs67,147 crore through the IPO route, while in 2016, 26 companies raised Rs26,493.8 crore through IPOs.

IPO fund-raising has largely been dominated by the banking, financial services and insurance sector, with several major issuances such as General Insurance Corp. of India Ltd, HDFC Standard Life Insurance Co. Ltd, SBI Life Insurance Co. Ltd, AU Small Finance Bank Ltd, Reliance Nippon Life Asset Management Ltd and BSE Ltd.

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