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PE-backed Fincare Small Finance Bank files draft papers for IPO
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Private equity-backed Fincare Small Finance Bank has filed for an initial public offering (IPO) worth Rs 1,330 crore (approximately $181.2 million). 

The offer comprises a fresh issue of Rs 330 crore and an offer for sale of Rs 1,000 crore by promoter Fincare Business Services. 

This offer includes a reservation for employees. At the time of filing draft papers for IPO, Fincare Business Services held 78.57% stake in the bank. 

The Bengaluru-based microfinance institution-turned small finance bank (SFB) is backed by marquee investors including True North Fund V LLP, Wagner, Tata Opportunities Fund, LeapFrog Investments, Kotak Mahindra Life Insurance, Edelweiss Tokio Life Insurance and Sidbi (Small Industries Development Bank of India). 

Earlier this month, True North partly exited the bank as Motilal Oswal Private Equity (MOPE) picked up a minority stake worth around Rs 185 crore ($25 million). True North owns 2.34% of the bank. 

In 2019, VCCircle had reported that the microlender was aiming to go public by 2021 after raising fresh funding of Rs 85 crore (around $12.1 million) then. 

The IPO’s bankers and book running lead managers are ICICI Securities, IIFL Securities, Axis Capital and SBI Capital Markets, while the book running lead manager is Ambit. 

This comes at a time when small finance banks are going to the market to fulfil norms that mandate listing within three years of starting banking operations. 

Over the last two years, a string of five small finance banks announced IPO plans including Varanasi-based Utkarsh SFB which filed a draft red herring prospectus for a Rs 1,350-crore IPO in March this year. 

Suryoday SFB received regulatory approval in December 2020 to float an IPO while Kerala-based EASF SFB filed its draft IPO proposal in January last year. 

AU Small Finance Bank floated its IPO in 2017 while Equitas Small Finance Bank and Ujjivan Small Finance Bank Ltd listed their shares in November and December 2019, respectively. 

Earlier in February 2021, Aavishkaar Group-promoted microlender Arohan Financial Services Pvt Ltd also filed for an IPO worth Rs 1,800 crore ($250 million). 

Fincare SFB 

Fincare aims to use the proceeds from the IPO to shore up Tier I capital base to meet future capital requirement. 

Fincare, earlier known as Disha Microfinance, started banking operations in July 2017 and is now a "digital-first" small finance bank with a focus on under-banked and unbanked customers, in rural and semi-urban areas. 

Established in September 2014, Fincare Business is a core investment company managing businesses that cater to the poor. Its main unit is Fincare Small Finance Bank. 

Before converting into a small finance bank, the lender was largely conducting business from two entities – West India-based Disha Microfin and South India-based Future Financial Services under a single overarching management team. 

For 2019-20, Fincare posted over 40% growth in net profit at Rs 143.5 crore as compared with Rs 102 crore a year ago. 

According to Crisil, among comparable SFB peers in India, it had the highest growth rate in advances from 2017-18 to 2019-20. 

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