Microfinance lender Spandana Sphoorty Financial Ltd has raised $270 million of funding, which will facilitate its exit from the corporate debt restructuring cell (CDR) after seven years, it said in a statement on 31 March.
Around $100 million will come 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, it said.
Spandana is one of five microfinance firms referred to the CDR cell after Andhra Pradesh in 2010 passed a law tightening rules for the industry. The law, passed in response to reports that coercive loan recovery practices were causing suicides among overextended borrowers, triggered a wave of loan defaults in the state, then the biggest market for microlenders.
According to the statement, Spandana has fully repaid its outstanding restructured loans due to all of its lenders.
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The other firms that came under the CDR cell were Trident Microfin Pvt. Ltd, Share Microfin Ltd, Asmitha Microfin Ltd and Bhartiya Samruddhi Finance Ltd, known as Basix. Of these five entities, only Spandana and Share Microfin were able to survive.
“With this capital infusion, Kedaara will pick up close to a 55% stake in the company. None of the existing investors are looking to exit at this point; however discussions are on," said Padmaja Reddy, founder and managing director of Spandana Sphoorty. “We could look at an initial public offer in next 18 months."
After the stake sale, Reddy’s shareholding will halve to 20%. Other existing investors, including JM Financial India Fund, Valiant Capital Partners FDI Ltd, Lok Capital, Helion Venture Partners and Small Industrial Development Bank of India, will see their shareholding fall to 25% from 60%.
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 microfinance lender made its first profit of Rs60 crore in 2013-14. As of 31 December, Spandana had a loan portfolio of Rs1,287 crore and 524 branches spread across 13 states. The firm expects to close the current fiscal year with a profit of Rs165 crore, said Reddy.