Microlender Chaitanya Rural raises $7 mn from Equator, others

Chaitanya Rural Intermediation and Development Services Pvt. Ltd has raised Rs 47 crore ($7 million) from a fund managed by private investment firm Equator Capital and other investors, the Bengaluru-based company said on Friday.

The company aims to use the money to expand its branch network in states where it already operates and enter the northern region, co-founder Samit Shetty said.

The firm raised funding from ShoreCap II Ltd, which is managed by Equator, some existing investors and a few affluent individuals, Shetty said. He didn’t name the other investors.

Chaitanya Rural is a holding company and fully owns microlender Chaitanya India Fin Credit Pvt. Ltd, which operates in Karnataka and Maharashtra. The microfinance company had raised about Rs 5.3 crore in two tranches of seed funding in 2009 and 2010. It secured about Rs 7 crore in its Series A round in 2011 from Blume Ventures, according to VCCEdge, the data research platform of VCCircle.

Chaitanya India Fin also had planned to raise Series B funding last year, according to a company note for investors. It couldn’t be immediately ascertained if the Series B round was completed.

Shetty said that ShoreCap has a track record of supporting institutions such as Chaitanya and that the funding will help the lender provide different types of financial services to those sections of the society that need them the most.

Boutique investment banking firm Unitus Capital acted as the financial adviser to Chaitanya for this transaction.

Chaitanya India Fin was started in 2009 by Shetty and Anand Rao. It provides a full bouquet of financial products such as microfinance, livestock financing, two-wheeler financing and micro housing loans to the low-income rural population. It has a base of about 1,50,000 individual borrowers.

The microlender posted revenue of Rs 18.9 crore and net profit of Rs 83 lakh for 2014-15, according to its annual report. The financials for the last financial year couldn’t be immediately ascertained.

Davis Golding, executive vice president at Equator Capital, said the Bengaluru-based non-banking finance company has a good track record of providing financial services to the rural population in Karnataka.

The PE firm had recently struck a neat profit from its six-year-old investment in microlender Satin Creditcare Network Ltd. It had invested in Satin Creditcare in 2010 and again in 2013.

Besides Satin Creditcare and Chaitanya, the $80 million fund of Equator had invested in Bhartiya Samruddhi Finance Ltd over 15 years ago. It had exited the investment in tranches during 2009-10, according to VCCEdge, the data research platform of VCCircle.

India’s microfinance segment has seen quite a bit of action this year. International Finance Corporation (IFC), the World Bank’s private-sector lending arm, said in May it planned to invest up to Rs 135 crore in Grameen Koota Financial Services Pvt Ltd via debt.

IFC had previously invested in a number of Indian microlenders including Bandhan Financial, which has now turned into a commercial bank, as well as Satin Creditcare and Swadhaar FinServe, besides backing a host of sector-focused fund managers like Aavishkaar and Lok Capital.

Also, two large microfinance firms went public this year; Ujjivan Financial Services Ltd and Equitas Holdings Ltd in April and May. Satin Creditcare is also listed on the bourses, as is SKS Microfinance Ltd.

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