Mumbai: Disha Microfin Ltd has restructured its business as it prepares to launch its small finance bank (SFB) operations, said two people aware of the development.

Backed by India Value Fund Advisors (IVFA), Disha Microfin is part of Fincare Business Services Ltd, which acts as a holding company and owns other businesses such as Future Financial Services Pvt. Ltd (FFSPL), a microfinance institution; Lok Management Services, a business correspondent services firm; and India Finserve Advisors, a financial and management advisory services firm.

“They (Fincare) have consolidated all the various microfinance businesses that they were operating under various entities. As part of this exercise, Disha, which will house the SFB operations, has bought out the entire microfinance business being managed under FFSPL in a slump sale for around Rs120 crore," said one of the two people mentioned above, requesting anonymity, as they are not authorized to speak to the media.

Also as part of the restructuring, IVFA’s shareholding in both Disha and FFSPL has been transferred to Fincare Business Services, which will act as the holding company for the SFB operations under Disha, through a share swap, he said.

IVFA held around 74% stake in Disha and FFSPL, he said, adding that after the restructuring, IVFA holds a similar stake in the holding company.

IVFA is also investing close to $10 million in the holding company, Fincare, to fund growth plans as well as to pare some of the existing debt, said the second person cited above, also requesting anonymity.

A spokesperson for Disha Microfin confirmed the restructuring of the businesses under the Fincare umbrella.

“Indium IV (Mauritius) Holdings Limited (Indium IV), the legal investment vehicle advised by IVFA, has been an investor of the platform since 2010, and over the years, has invested more than Rs250 crore in the Fincare platform," the spokesperson said.

Disha is currently in the process of applying to the Reserve Bank of India for the final approval and expects to launch its small finance bank around April 2017, he added.

According to Fincare’s website, the group has Rs1,986 crore of assets under management with 1.25 million active loan clients. The group has a presence in seven states and one Union territory.

Disha was one of the 10 institutions that received in-principle approval from 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 SFBs include 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.

Disha is yet to file for its final licence from the RBI. Six of the 10 in-principle licence holders have received the final nod so far.

Apart from Disha, others that are yet to receive the final nod include Janalakshmi Financial Services, RGVN (North East) Microfinance and Au Financiers.

Capital Small Finance Bank and Equitas Small Finance Bank have started operations. Utkarsh intends to start operations by 14 January, Mint reported on 21 November.

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