Sachin Bansal is in talks to buy a large stake in Chaitanya Microfinance from an existing investor as the Flipkart co-founder starts building out his platform play in the financial services space, said two sources familiar with the development. The financial details of the transaction could not be ascertained, but Bansal is expected to pick up about 35% stake held by investment fund Shorecap in the company besides infusing fresh equity for further expansion of the loan book, said these sources.
“Bansal is also talking to other small shareholders in the company to buy their stakes to increase his holding,” said one of the sources briefed on the deal. The Bengaluru-based company has a loan portfolio of Rs 390 crore and 2.5 lakh active borrowers. Chaitanya could be valued at Rs 760 crore in the transaction, said sources in the microfinance industry, but this could not be independently ascertained.
The development comes as Bansal has been exploring opportunities to get back to entrepreneurship after selling his about 5% stake in India’s largest online retailer Flipkart to US retail giant Walmart for $1 billion last year. He has started putting this capital to use, announcing a $92 million investment in ride hailing major Ola earlier this year.
But Bansal has been looking at areas like financial services and agricultural technology more strategically to build a portfolio through acquisitions. He had set up a holding company called BAC Acquisitions last year for this, and has been looking at companies in financial technology, insurance and lending actively.
When contacted, Chaitanya CEO Anand Rao and Bansal declined to comment on the development.
Chaitanya India Fin Credit is the operational non-banking finance company which is owned by Chaitanya Rural Intermediation Development Services Private Limited.
It was founded in 2009 by Anand Rao and Samit Shetty, mechanical engineers from Bengaluru’s University Visvesvaraya College of Engineering. While Shetty has an MBA from IIM-Ahmedabad, Rao holds MA in international relations from Syracuse University. Shetty and Rao together own about 25% stake in the company and are likely to continue.
Chaitanya Microfinance on average lends loans of Rs 25,000-35,000 to MSMEs and unbanked or semi-banked individuals such as tailors, auto-drivers, vegetable sellers, idli shop owners, bike garage owners, etc. Though the company started in Karnataka, with adequate debt funding from banks and IFMR, it was able to expand to other states like Maharashtra and Bihar. Chaitanya had total income of Rs 74.9 crore with a loss of Rs 8 crore in the year March 2018.
“ICRA notes that given the envisaged growth of 35-40% over the next three years, the company would have to secure equity capital to the extent of about Rs 100 – 120 crore for maintaining a comfortable capital structure,” said a note by the credit rating agency ICRA on the company dated November 5.