Suryoday Microfinance, one of the 10 entities that have been granted in-principle approvals for small finance bank licences by Reserve Bank of India (RBI), is in advanced stages of talks to issue fresh equity shares via a private placement, sources told FE.
“Post the fresh issuance to certain domestic institutions, foreign investors’ stake in the expanded equity base of the company will come down to 49%, in line with RBI’s guidelines,” they said, adding that no existing foreign investor is looking at an exit. According to the FY15 Annual Report of the company, its foreign shareholders include World Bank Group’s International Finance Corporation.
“Domestic shareholders own about 32% of our company, with the promoter group holding about 20%. So, we need to increase the promoter group shareholding to 26% and overall domestic shareholding to 51%, which I don’t see as a major challenge. We are in talks with a couple of domestic investors and as of now there is enough visibility of us getting the required capital structure in place by March,” R. Baskar Babu, its CEO, had told FE last month.
According to RBI’s guidelines, the FDI policy for SFBs is the same as that for private sector banks.
This comes on the heels of another SFB licencee, Bengaluru-based Ujjivan Financial Services, announcing last month that it had raised about R300 crore in a pre-IPO placement to investors like HDFC Life, Sundaram Mutual Fund and Shriram Life.
Like Suryoday Microfinance, foreign shareholders, including the likes of Sequoia Capital and International Finance Corporation, held a majority stake in it as of FY15 and the pre-IPO placement was seen as an effort by it to get its capital structure in line with RBI’s guidelines.
In September, 2015, the central bank, as part of its objectives to further financial inclusion, had granted in-principle approvals to 10 entities (from amongst 72 applicants) for setting up SFBs. While the central bank hasn’t put any restriction on the area of their operation, it has mandated that at least 50% of an SFB’s portfolio should constitute loans and advances up to Rs 25 lakhs and that at least 75% of their exposure should be to the priority sector.
Having started operations in 2009, Suryoday Microfinance’s loan disbursement has grown at a CAGR of almost 120% in the last six years, reaching Rs 1,663 crore in FY15. Last fiscal, its net interest income – the difference between interest earned and interest expended – was Rs 48.9, on which it earned a net profit of Rs 16.8 crore.
In FY15, Suryoday Microfinance had a book value per share of Rs 39.9, on a equity base of 3.29 crore shares. The only listed microfinance company SKS Microfinance trades at Rs 530 and at a valuation of 4.25 times estimated book value for FY17.