capital market: NBFC MFIs ready to tap into the capital market

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Indian non-bank microfinance lenders are gearing up to tap into the capital market as the sector promises steady growth after a few anxious years.

The sector grew by 10% year-on-year to Rs 2.85 lakh crore at the end of March, according to data released by industry body Microfinance Institutions Network (MFIN). Higher growth is expected to print this fiscal year as normalcy in business returns after the removal of Covid-related restrictions.

While one NBFC MFI is looking to raise capital through an initial public offering, others will sell shares primarily on a private placement basis, people monitoring the industry said.



The proposed IPO by Fusion Microfinance consists of a new issue of shares worth Rs 600 crore. Arohan Financial Services is currently considering raising funds from existing investors after the deadline for its proposed IPO expires.

Lenders like Annapurna Finance,

Microfin, Sindhuja Microcredit and Uttrayan Financial Services are working to sell shares, officials of those organizations said.

Bhubaneswar-based Annapurna is raising Rs 115 crore in shares while Delhi-based Sindhuja is targeting Rs 80 crore and Kolkata-based Uttrayan is planning a Rs 50 crore infusion.

Muthoot Microfin, part of Kerala’s Muthoot Pappachan group, is seeking to raise $35 million this fiscal year, following the equity injection of $50 million last year, chief executive Sadaf Sayeed said. . “We expect the business to grow by 30-35%; therefore, we will raise additional Rs 2,500 crore in debt,” Sayeed said.

“Raising capital has become more difficult these days as the growth trajectory for most lenders has been derailed in the wake of the pandemic. Also, investors tend to put their money in bigger companies while smaller ones with a portfolio of less than Rs 500 crore struggle,” said Kartick Biswas, managing director of Uttrayan, who has a portfolio of Rs 200 crore.

Among the greatest,

is in full preferential allocation of shares. It made a preferential allotment of shares and convertible warrants worth Rs 225 crore, against which Rs 75 crore is prepaid in January and the balance will be paid within 18 months, said the President HP Singh.

Industry captains, however, lament that the Small Industries Development Bank of India, which manages the Indian Microfinance Equity fund, is not making new equity investments.

MFIs-NBFC had between them raised Rs 2,832 crore in the last fiscal year, almost 15% more than they did in the previous fiscal year, with the sector showing steady traction in revenue growth. loans while repayment collection has returned to pre-Covid levels.

They had raised Rs 2,476 crore in FY21. The total equity of NBFC-MFIs rose to Rs 21,419 crore at the end of March 2022, according to MFIN data.

These lenders also received a total of Rs 47,931 crore in debt financing in FY22, up 18% from borrowings in the prior year.

The entire microfinance industry caters to 5.8 crore unique borrowers through 11.3 crore loan accounts. The gross loan portfolio of NBFC-MFIs stood at Rs 96,561 crore, reflecting a 19.4% year-on-year increase.

“The microfinance industry made good progress in the fourth quarter of FY22, building on the momentum created in the third quarter. The quality of the portfolio has improved significantly compared to the end of the first quarter of FY22, when the second wave of Covid caused widespread stress in all regions of the country,” said the Managing Director of MFIN, Alok Misra.

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