MUMBAI: Annapurna Finance, a non-banking financial company in Odisha, plans to raise $75 million-100 million in equity this year with some of its early backers selling their stake in part or full as the company looks to grow beyond microfinance, four people familiar with the matter said.
“While the company has a strong foothold in the microfinance segment, it is currently looking to build and shore up its presence in the non-microfinance segment,” one person said.
“The deal is expected to be formally launched later in the year and will likely see some of its early investors like Asian Development Bank (ADB) and Oman Joint India Investment Fund exit in part or full,” a second person said, adding that most of the capital to be raised will likely fund its expansion plans.
Unitus Capital is working with the company as an advisor to help with the process, a third person added.
Annapurna declined to comment on the fundraising plan. ADB, Oman Joint India Investment Fund and Unitus did not respond to Mint’s requests for comment on Wednesday evening.
“The company has been in the market to raise sizable equity capital for the last 2-3 years but hasn’t been successful due to a broader down-cycle in the microfinance sector,” a fourth person said.
Incremental debt and equity funding in the NBFC-microfinance institution (MFI) space has been lukewarm, according to Akshay Gupta, director of Prime Securities.
“Recurring cyclical issues and ballooning gross NPAs in the MFI sector (in excess of 15%, up from 8.8% a year earlier) led to a contraction in the gross loan portfolio by about 7% to ₹3.8 lakh crore, making the sector unattractive for debt and equity investors and capital becoming expensive and diminishing,” said Gupta.
He added that there have been only a couple of noteworthy deals – $230 million PE raise in Svatantra Microfin (largely due to promoter group scale, pedigree and business quality) and Spandana Spoorthy’s debt funds raise.
Annapurna said earlier this year it raised $100 million through a syndicated multi-currency social loan facility. Its last equity fundraise was in May 2024, when Piramal Alternatives Trust, a wholly owned subsidiary of Piramal Enterprises, acquired a 10.4% stake in Annapurna for ₹300 crore.
Other existing and past investors include Small Industries Development Bank of India, Incofin Investment Management, BIO Invest, Oikocredit and Bamboo Finance Partners, as per online reports.
High credit costs
Since the last equity raise, the NBFC has maintained its collections and asset quality while credit costs remained high on account of various challenges in the microfinance sector. The increase in the company’s assets under management has been limited, which has led to lower growth in top-line revenue, Crisil said in a report in December. The company had an AUM of ₹11,034 crore in FY25 from ₹10,336 crore a year earlier.
Annapurna has a strong foothold in Bihar, Odisha and Madhya Pradesh. A significant portion of its portfolio consists of lending under the joint-liability group mechanism, under which individuals form a group to guarantee each other's loans. These customers generally have below-average credit risk profiles with lack of access to formal credit.
These borrowers are typically farmers, tailors, cattle owners/traders, small vegetable vendors, teashop owners and dairy farmers and their incomes can be volatile and dependent on the performance of the local economy.
The share of microfinance loans in the AUM was 84% as of 30 September, while the rest was micro, small and medium enterprise (MSME) loans, Crisil noted in a December report. Various events over the years, including regulatory and legislative challenges, have disrupted operations in the sector. These include demonetization in 2016 and the covid-19 pandemic.
The resultant elevated delinquencies hurt the profitability and capitalization metrics of NBFC-microfinance institutions (NBFC-MFIs). While the sector has navigated these events, it remains susceptible to local elections, natural calamities and borrower protests, which may increase delinquencies, Crisil said.
Founded in 2009 by Gobinda Chandra Pattanaik and Dibyajyoti Pattanaik, Annapurna Finance also offers financial and non-financial services including customized insurance and individual need-based products for clients. It introduced large individual loans for MSMEs and the affordable housing segment.
The company’s total income grew marginally to ₹2,183 crore in FY25 from ₹2,074 crore a year earlier. Profit narrowed to ₹69 crore from ₹233 crore in FY24, Crisil’s report showed. With an AUM of ₹10,839 crore, it posted revenue of ₹1,026 crore and profit of ₹13 crore in the six months ended September.