Arohan in talks with sovereign wealth funds, PEs to raise $200 mn3 min read . Updated: 12 Sep 2019, 11:05 PM IST
- With the fundraise, Arohan plans to diversify its product offerings to cater to the needs of an entire family
- Arohan plans to complete the fundraise in the next few months, and is in discussions with sovereign wealth funds
Arohan Financial Services is in talks to raise $200 million from existing and new investors, two people aware of the matter said on condition of anonymity, as the microfinance firm backed by the Aavishkaar-Intellecap group looks to expand business before a public share sale.
Of this, Arohan is already close to raising ₹130 crore (approximately $18 million) from existing investors such as private equity firm Tano Capital, secondary deals specialist TR Capital, Danish private equity firm Maj Invest and the Michael and Susan Dell Foundation, managing director Manoj Kumar Nambiar said.
Arohan plans to complete the fundraise in the next few months, and is in discussions with sovereign wealth funds, PE funds and development finance institutions, Nambiar said in an interview.
Founded in 2006, Arohan is backed by impact investment firm Aavishkaar-Intellecap group and claims to be the largest microfinance institution in east India. It operates in 10 low-income states of central and eastern India and has a loan portfolio worth ₹4,500 crore.
Parent Aavishkaar-Intellecap group will also invest in this round of fundraising, Nambiar said. After the fundraise, Aavishkaar’s stake is expected to increase to 36.5% from the 24% it owned in September last year, when it was planning to list in public markets.
“The current fundraise will help get our promoter holding at an optimum level (at 36.5%), strengthen the capital base of the company for the next phase of growth and also facilitate an exit for old investors," Nambiar said.
“Post this, the promoter group and the board will take a call on the IPO timing, size, etc. The path to an IPO takes at least 12 to 18 months given regulatory approvals, market appetite, etc.," he added.
The company claims to have over 2 million clients via 645 branches and over 5,600 employees.
“We serve over 2 million end clients today across the 10 states through a network of 645 branches manned by over 5,600 employees. We are a unique NBFC MFI which is highly IT-enabled, has the ability to originate, underwrite and manage credit ticket size of ₹10,000 to ₹20 crore to different client segments," he added.
With the fundraise, Arohan also plans to diversify its product offerings to cater to the needs of an entire family. “This means we will deal with the other requirements like a two-wheeler loans, an education loan, a home improvement loan, a business loan and other services like bank accounts, insurance, pensions etc," Nambiar said.
Arohan Financial Services’ efforts to raise capital come at a time when many non-bank lenders are struggling due to the liquidity crunch following defaults at companies such as Infrastructure Leasing and Financial Services (IL&FS), and Dewan Housing Finance Ltd.
The microfinance industry, however, has continued to see strong growth in loan disbursals. Gross loan portfolio stood at ₹1.87 trillion at the end of 31 March, up 38% year-on-year, according to a June report by MFIN, an RBI-recognised self-regulatory organisation and industry association of the microfinance industry.
The industry recorded 93.3 million microfinance accounts as of 31 March, a growth of 21.9% from a year ago. Eastern India, where Arohan operates, continued to show strong growth with Bihar and Odisha now ranked 2 and 3 in terms of number of customers, the report said.
“The liquidity crisis has had no impact on us at all on both availability of funds and cost of funds. With our size, ratings, credibility, promoter group holding, we have been able to build on our borrowing relationships and grow them," Nambiar said.
Besides Arohan, Aavishkaar Group’s businesses currently include IntelleGrow, which provides business loans to small and medium firms; and Tribe, a fintech platform connecting lenders to small entrepreneurs. It also runs an asset management business which manages several impact investment funds.