Motilal Oswal PE to buy stake in SME lender Intec Capital

After finding success with its investment in AU Financiers, Motilal Oswal Private Equity is betting on another non-banking finance company.

The PE firm is picking up stake in Intec Capital for Rs 37.3 crore through a combination of compulsorily convertible preference shares (CCPS) and equity shares. Motilal Oswal PE is acquiring 16.92 per cent stake through India Business Excellence Fund-II.

The deal comes soon after the PE firm made an investment of Rs 35 crore in Surat-headquartered Magicrete Building Solutions, which makes lightweight concrete blocks and panels. Motilal Oswal also got attractive returns from its investment in the NBFC space, where it recently part-exited from Jaipur-based AU Financiers.

The current deal includes allotment of 666,202 equity shares at Rs 109.4 a piece while 274,122 CCPS will be allotted at Rs 1,094.4 a unit. Shares of Intec Capital closed at Rs 92 a piece, down 3.16 per cent on the BSE on Tuesday, giving the company a market capitalisation of Rs 117.76 crore.

Motilal Oswal PE’s Vishal Kumar Gupta and Prakash Dhoot joined the board of Intec Capital as part of the transaction.

ICICI Securities acted as the exclusive financial advisor to Intec Capital Ltd while Udwadia Udeshi & Argus Partners acted as the legal advisor. Amarchand & Mangaldas & Suresh A. Shroff & Co. acted as the legal advisor to Motilal Oswal.

Intec Capital is involved in lending to small and medium enterprises across the country. The company was set up by Sanjeev Goel back in 1994. Goel, a chartered accountant with a master’s degree in International Finance from the University of Iowa, had set up a computer hardware and software distribution firm before starting Intec Capital.

Intec focuses on machinery financing requirements of SMEs in sectors like auto & engineering, printing & packaging, plastic & injection moulding, medical, healthcare & pharmaceuticals and food processing. It works closely with more than 75 machinery vendors, one of the main avenues for the company to source business.

According to CARE Ratings, Intec Capital reported capital adequacy ratio (CAR) of 18.93 per cent as on March 31, 2012, as against CAR of 23.74 per cent reported as on March 31, 2011. “Although the CAR has declined from the previous year, it remains comfortable as the same is above the minimum regulatory requirement of 15 per cent. As in September 2012, CAR remained at 17.41 per cent,” the CARE report added.

The infusion by Motilal Oswal will help the company shore up its CAR. Intec’s gross loan portfolio increased 50 per cent during FY12 to Rs 591.10 crore.

For the first three quarters of FY13, Intec Capital reported 46 per cent increase in total income to Rs 80 crore with net profit up 41 per cent to Rs 8.61 crore as compared to the same period last year.

(Edited by Sanghamitra Mandal)

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