Bangalore-based Janalakshmi Financial Services plans to raise around USD50 million from International Finance Corporation (IFC) to help the company with its transition from a microfinance lender to a Small Finance Bank (SFB). Although more details in this regard are yet to be finalized, it is clear that IFC’s investment in the company will be on the debt side and will help Janalakshmi in coping with the heavy investment requirements while switching to the banking business model.
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The company has been raising money otherwise too and on the equity side to sail through the capital requirements. Earlier in April, it raised USD150 million in a funding round led by private equity investor TPG. Apart from TPG, Tata Capital Growth Fund, Morgan Stanley Private Equity Asia, and Enam Shares & Securities Ltd are other prominent investors in Janalakshmi. This fund raising exercise is important for the company as it does not intend to get itself listed anytime soon. Instead of the IPO, Janalakshmi is looking to restructure itself and create a three-tier structure to comply with regulatory requirements.
Started by Ramesh Ramanathan in 1999, Janalakshmi Financial Services is a leading urban focused microfinance institution with a borrower base of more than 4.6 million borrowers and a loan portfolio of around INR91 billion (INR9,100 crore) as of March 2016.
Janalakshmi is one of the 10 companies that were awarded in-principle approvals by RBI to convert their operations to SFBs last year. As per the regulations of the Reserve Bank of India (RBI), SFBs are required to have at least 26% of their shareholding with domestic investors at any time. Foreign investment under the current FDI Policy is permitted to the extent of 49% under the automatic route, although it can be increased to 74% under the approval route.
Janalakshmi – one of the 10
Here is the list of all the 10 players which received RBI’s in-principle approval for launching SFB:
- Au Financiers (India) Ltd., Jaipur
- Capital Local Area Bank Ltd., Jalandhar
- Disha Microfin Private Ltd., Ahmedabad
- Equitas Holdings P Limited, Chennai
- ESAF Microfinance and Investments Private Ltd., Chennai
- Janalakshmi Financial Services Private Limited, Bengaluru
- RGVN (North East) Microfinance Limited, Guwahati
- Suryoday Micro Finance Private Ltd., Navi Mumbai
- Ujjivan Financial Services Private Ltd., Bengaluru
- Utkarsh Micro Finance Private Ltd., Varanasi
Out of these, Equitas Holdings and Ujjivan Financial Services have already brought their IPOs which have rewarded investors.