Jacob Ballas to pick up 5% stake in Religare Finvest

Written by Rajat Guha | Rajat Guha | New Delhi | Updated: Dec 30 2011, 08:06am hrs
Private equity firm Jacob Ballas is picking up 5% stake in Religare Finvest, the non-banking financial services arm of Religare Enterprises, for R200 crore. The deal would value Religare Finvest at R4,000 crore, which is primarily an MSME focused non-banking financial company, sources familiar with the deal said.

According to sources, the deal would be announced on Friday. However, the company spokesperson declined to comment on the development.

This would be the second private equity investment in Religare Finvest. Earlier Avigo Capital, a mid-market private equity firm, had also invested R150 crore in Religare Finvest.

The development seems interesting at a time when NBFC firms are facing challenges in form of regulatory hurdles. The recommendations of the Usha Thorat Committee on NBFC reforms is expected to pose challenges to incumbents especially those who have a collection heavy and assignment driven business model. Compounded by regulatory tussles, repeated interest rate hikes by the RBI has put pressure on NBFC margins and impacted the sector negatively. The stocks of all public listed NBFCs have suffered badly in this environment.

Religare Finvest provides debt capital to MSMEs in the form of loans against property, working capital loans, loans against plant and machinery, vehicles among others.

Religare Finvest has more than 25,000 MSME accounts and its loan book stands at R11, 380 crore as of quarter ending September, 2011.

With the recent PE investments and upcoming ones combined with strong promoter backing, it looks like Religare Finvest's growth will not get hampered by increased capital requirement. However, both company and PE investors will be tested by the choppy market condition which is likely to dominate the sector for next few quarters, an analyst tracking the SME sector said.