Disha Microfin to raise $44.2M for restructuring

Disha Microfin Pvt Ltd, one of eight microfinance institutions to get Reserve Bank of India’s in-principle nod to start a small finance bank, plans to raise about Rs 300 crore ($44.2 million) to restructure its ownership in order to comply with the central bank’s foreign shareholding norms.

The company is currently 74 per cent owned by private equity fund India Value Fund Advisors (IVFA) through a Mauritius-registered entity. This will have to be brought down to 49 per cent to comply with RBI norms for small finance banks.

Fincare Group, Disha Microfin’s parent, had applied for a small finance bank licence under the microlender’s name. The group also operates microlender Future Financial Services Ltd, management services provider India Finserve Advisors Pvt Ltd and Lok Management Service Pvt Ltd, a business correspondent to banks.

The group now plans to bring all the entities under one umbrella to operate as a small finance bank with a base of about Rs 1,000 crore. It said it will look at issuing fresh shares of Rs 150 crore each for domestic and foreign fundraising.

The fundraising plan was first reported by the Mint newspaper.

The group also plans to expand its operations this year by entering new states. “We might add a couple of more states but we will be focused on going deeper on the ones where we have a presence,” said Prakash Sundaram, chief strategy officer and digital innovation leader at Fincare.

He said the group is looking at assets under management of Rs 10,000 crore in five years and total balance sheet size of Rs 22,000 crore. “As far as branches are concerned, we are still debating whether we should have 300-400 branches or have a branch-light model,” he added.

While Disha Microfin was one the smallest MFIs to get RBI approval for a small finance bank, combining the asset base with other group entities would mean the firm might get as big as ESAF Microfinance.

Besides Disha Microfin, Equitas Holdings Ltd and Ujjivan Financial Services Ltd are the only microlenders with small finance bank licences to come out with a plan for diluting foreign shareholding.

Equitas, which is looking to raise Rs 600 crore via a fresh issue of shares, had got the Securities and Exchange Board of India’s nod last month for its IPO plans. Ujjivan, which had applied for an IPO in December, is awaiting approval from the capital markets regulator.

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