Non-banking financial company (NBFC) Capital First Ltd, majority-owned by US private equity firm Warburg Pincus, said on Thursday it will buy a 10% stake in fin-tech startup Sienna Systems Resources Pvt. Ltd.
Capital First will purchase equity shares worth an 8% stake and warrants equivalent to a 2% stake in Sienna for a total of Rs 4.25 crore ($665,000) in cash, it said in a stock-exchange filing. The warrants can be converted into shares after 12 months, it added.
VCCircle had reported in November 2016 that Capital First was looking to strike acquisition deals to diversify its loan book by shifting focus from wholesale lending to retail loans.
Capital First said the deal will help it tie up with Sienna and keep a close watch on emerging technologies in the financial services sector.
The NBFC mostly offers small-ticket loans to salaried individuals and self-employed people such as shopkeepers and small traders with a short tenor that ranges from eight months to two years.
Warburg Pincus acquired a majority stake in Capital First, formerly Future Capital Holdings Ltd, about five years ago. The PE firm held a 61.22% stake in the NBFC at the end of December 2016.
In August last year, VCCircle reported that the PE firm had been looking to pare its stake in Capital First and that it had initiated talks with a clutch of potential investors including Blackstone to sell its stake.
Capital First also counts Singapore sovereign wealth fund GIC Pte Ltd as a shareholder.
Shares of Capital First declined 0.5% on the BSE on Thursday to end at Rs 764.80 apiece. The stock has advanced 8.5% in the past month. It has traded between Rs 809 and Rs 427 over the past year, stock-exchange data showed.
Mumbai-based Sienna was incorporated in 2010 but started operations in 2015-16. It builds and manages
programmes based on digital payments, such as for loan distribution and financial exchange, insurance and investing, among others. These programmes are either branded or owned by the company or offered on a white-label basis to financial institutions.
The startup was co-founded by Javed Tapia, a director at Clover Infotech, which is an IT services provider specialising in database management, application development and management, enterprise solutions among others. Tapia also served as a director at Delta Magnets Ltd and president of the Indian subcontinent region at Red Hat Inc.
The firm also counts former Aptech Ltd managing director and chief executive Ninad Kapre as one of its four directors, according to information from the Ministry of Corporate Affairs.
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