The funding round also saw participation from Bengaluru-based PE fund, Amicus Capital Private Equity and Amicus Capital Partners India Fund, which had invested ₹38 crore in June and ₹5 crore, respectively, taking the total fund raise of the lender to ₹134 crore. Existing investor, Pi Ventures LLP also participated in the round.
“Capital Small Finance Bank has grown consistently since inception and holds a market leadership position in the state of Punjab. The current round of capital raise will help the Bank deepen its penetration in Punjab and expand rapidly into the states of Haryana, Rajasthan and NCT (National Capital Territory) Delhi with a significant focus on MSME loans," said Sarvjit Singh Samra, founder and managing director of Capital Small Finance Bank.
“The fund raise enables the bank to achieve its growth targets while remaining well-capitalized in the near term," he added.
Founded in 2000 by Sharma, the bank also counts HDFC Life, ICICI Prudential Life and Small Industries Development Bank of India (SIDBI) as its investors. The bank is one of the two non-micro finance institutions out of ten entities that were granted an ‘in-principle’ approval from the Reserve Bank of India to set up a small finance bank.
Having started operations in April 2016, the lender is a retail-focused franchise both on the liability and lending side and provides various banking services through its network of more than 150 branches, with the highest concentration in Punjab, followed by Chandigarh, Haryana and Delhi.
It has a diversified loan book comprising of agriculture loans, loans to micro, small and medium enterprises (MSMEs), mortgage loans, personal loans and auto loans, along with a strong focus on agriculture and MSME sector. The lender’s loan book stood at ₹3,026 crore and deposits worth ₹4,107 crore, as on 30 September. Its current and savings account (CASA) ratio was about 40%, while its gross non-performing assets (GNPAs) was 1.3% of its total assets.
“Capital SFB has all the right ingredients such as a low-cost liability franchise, low GNPAs, high CASA ratio, diversified product profile and a stable management team, that are required to be successful in the Indian banking space," said Srinath S., chief executive officer of Oman India Joint Investment Fund II.
“We were particularly delighted to see such consistent track record of sustainable growth and profitability over two decades. We are excited to be part of Capital SFB as it now embarks on the journey of growth and expansion," he added.
OIJIF, co-sponsored by State Bank of India and State General Reserve Fund of Oman, last year announced the second close of its second fund, OIJIF II, with commitments of $230 million. The latest transaction marks its fifth deal from the second fund.
Other investments from its second fund include a ₹185 crore investment in PNB Metlife Insurance for a 2.04% stake in the life insurer in April, and another ₹ 155 crore investment in Annapurna Microfinance in June last year. It has also invested ₹100 crore in Pune-based automobile components maker Divgi TorqTransfer Systems and a ₹170 crore investment in Stanley Lifestyle, a luxury furniture and home decor products maker.
Most entities that converted to small finance banks have raised funds in the last couple of years to fund operations and to comply with RBI’s norms for foreign shareholding.
Larger SFBs, such as AU Small Finance Bank Ltd, Equitas Holdings Ltd and Ujjivan Financial Services Ltd, had opted for public listing. Utkarsh Small Finance Bank is looking to hire investment banks to advise on its ₹500 crore initial share sale, Mint reported on 18 September.
In June 2017, AU Small Finance Bank went public in a ₹ 1,900 crore initial public offering, while holding companies of Equitas and Ujjivan went public in April 2016.
Many small finance banks are held by private investors through a holding company structure, which was created to comply with RBI norms of having a designated promoter for such bank. Ujjivan’s small finance bank subsidiary has already filed its draft IPO papers for a ₹1,200 crore share sale, while Equitas notified the stock exchanges on 13 September that its small finance bank subsidiary will go public by March 2020.
In August 2018, Fincare Business Services Ltd, promoter of Fincare Small Finance Bank, raised ₹95 crore through a rights issue from existing investors. In September 2016, Utkarsh Micro Finance Pvt. Ltd raised ₹395 crore from RBL Bank Ltd, Sidbi and PE fund Faering Capital, among others, Mint reported.
The investment banking arm of Edelweiss Financial Services Ltd acted as the sole financial adviser to the bank for the transaction.