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Exclusive: True North-backed small finance bank licensee Fincare gets new PE investors

07 March, 2017

At least three private equity firms have invested in Fincare Business Services Pvt. Ltd as its flagship business Disha Microfin Pvt. Ltd looks to start small finance banking operations in the first half of this year, two persons close to the development told VCCircle.  

As reported last month by VCCircle, Fincare Business Services has been working with Edelweiss Financial Services to raise capital to rejig its foreign ownership in an effort to comply with regulatory norms.

Prior to this transaction, True North owned 74% of the entity through its Mauritius-registered entity. 

With this transaction, private equity investors TA Associates, Tata Opportunities Fund and LeapFrog Investments have acquired most of True North’s stake, VCCircle has learnt. Other firms that have come on board with this transaction include Kotak Life Insurance, SIDBI Venture Capital and some family offices, it is believed.  

The total deal size is in the range of Rs 500 crore (around $75 million), involving a mixture of primary and secondary sale of shares, and will help the firm gear up towards launching its small finance business.

The PE firms and the company did not immediately respond to a request for comment.

The company announced the transaction on Tuesday morning. In a statement, Sameer Nanavati, founder of Disha Microfin, said the deal would further strengthen the platform as it becomes a small finance bank. Besides the names mentioned earlier, the firm also attracted investment from  Edelweiss Tokio Life Insurance.

The firm did not give details but said the deal involved fresh investment and some secondary stake sale. It said that True North will remain an investor. It is believed True North has rolled over part of its holding to a new fund and thereby comes in as a co-investor in this round even as it partially exited its stake, as reported first by VCCircle.

Fincare Business Services

Established in September 2014, Fincare Business Services is a core investment company managing a clutch of businesses operating in the bottom-of-the-pyramid financial services sector with assets of over Rs 1,955 crore as of 31 October 2016, as reported previously. 

Its flagship businesses includes Disha Microfin, a small finance bank (SFB) licensee based in west India and Future Financial Services Pvt. Ltd that operates in south India. True North, which was previously known as India Value Fund Advisors, acquired stake in both these firms in 2010. 

Small finance banks have to comply with Reserve Bank of India’s (RBI) norms which state that no individual entity can hold more than 20% and should follow proper criteria for holding more than 5%.

Fincare Business Services needed to bring on board other investors to get the final approval from RBI to launch small finance banking operations as True North held 74% stake. 

True North invested about $40 million through multiple rounds in the individual businesses since 2010 as previously reported.

The PE firm invested in both Disha and Future Financial Services initially and later floated Fincare to own these assets. Disha and Future Financial are now merged. 

True North also created a central management company, India Finserve Advisors Pvt. Ltd as an advisory and management services arm for its investee companies and set up a fourth entity Lok Management Service Pvt. Ltd in 2012 as a business correspondent for banks.

According to the website, Fincare Business Services has assets under management (AUM) of Rs 1,800 crore from 12.4 lakh borrowers across seven states and one union territory and has over 3,500 employees.

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Exclusive: True North-backed small finance bank licensee Fincare gets new PE investors

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