Arohan Financial to raise ₹ 350 crore, plans IPO in 12-15 months
Arohan Financial will use the funding from promoters Aavishkaar-Intellicap and others to strengthen its capital adequacy ratio to expand in the 10 low-income states it is currently present in, says MD Manoj Kumar Nambiar
Mumbai: Arohan Financial Services Ltd, the Kolkata-based microfinance company, will raise around ₹ 350 crore from its promoters and existing investors to strengthen its presence in east and north India, a top company official said. The micro financier is also looking to launch its initial public offering (IPO) in the next 12-15 months to help some of its investors sell their stakes.
“Some of our investors have been with us for more than a decade like Michael and Susan Dell Foundation and listing will allow for an easy way to exit. We are working towards a possible listing in the next 12 to 15 months, depending on regulatory approvals and market situation,” Manoj Kumar Nambiar, managing director of Arohan, said in an interview.
Founded in 2006, Arohan is backed by Aavishkaar-Intellecap group and is the largest MFI institution in east India. The firm operates in 10 low-income states of central and eastern India and currently has a loan book of around ₹2,600 crore. It operates across 188 districts and has a customer base of close to 1.4 million. Promoters Aavishkaar and Intellecap together hold 24% stake in Arohan.
“The promoters, along with some of the existing investors, will infuse ₹350 crore into Arohan by end of October. The funds will be utilized for strengthening our capital adequacy to fund expansion in 10 low-income states we are currently present in. We want to increase our presence in the states where financial penetration is low instead of expanding just for the sake of being called a pan-India firm,” Nambiar said. After the fund infusion, promoters’ stake will rise to 36%.
Besides Michael and Susan Dell Foundation, existing investors of Arohan include Tano Capital, Maj Capital and Aavishkaar Goodwell II.
In May 2017, the firm raised $24 million from Denmark-based Maj Capital.
Several MFIs in India are lining up to raise money from public markets for their long-term capital requirements. In August, Bengaluru-based CreditAccess Grameen Ltd, which operates under the Grameen Koota brand, launched its IPO.
Some of the other micro lending institutions that are looking to raise money through IPOs include Muthoot Microfin Ltd and Hyderabad-based Spandana Sphoorty Financial Ltd.
Aavishkaar-Intellecap Group has funded and advised multiple MFIs, many of which have converted into small finance banks (SFBs), including Suryoday Small Finance Bank Ltd and Utkarsh Small Finance Bank Ltd.
According to a February 2018 Crisil Inclusix report, the coefficient of variation in financial inclusion across districts was maximum for east and north-east India at 0.34 and 0.41, respectively in 2016. The regions also have the lowest credit penetration.
However, nearly 60% of incremental loan accounts opened by MFIs in fiscal 2016 were in the north and the east, indicating the high growth potential for MFIs operating in the region.