Disha Microfin to raise capital through private placement

To commence operations by Nov-Dec 2016 with 100 branches

On its schedule to launch small finance banking operations by November-December 2016, Ahmedabad-based Disha Microfin has begun the process of raising capital through private placement.

On its way to raise Rs 300-400 crore of capital, the company has begun scanning private equity (PE) firms and financial institutions among others for raising foreign and domestic capital.

From current 26% domestic shareholding, Disha Microfin, which has Fincare Business Services Pvt Ltd as its holding company, will be looking to increase it to over 50% before the start of the bank.

"We are the only company among those who have received license for small finance bank that has room for raising foreign capital. Of the total Rs 300-400 crore of capital that we would be raising, around Rs 150-200 crore would be domestic and a similar amount would be raised through foreign participation. We are in the process of raising equity through private placements. These could be PE firms for foreign and financial institutions for domestic shareholding," said Keyur Doshi, co-founder and group chief financial officer, Disha Microfin Pvt Ltd.

As part of its preparation for the launch of small finance bank (SFB), Fincare, the holding company of microfinance institutions (MFIs) Disha Microfin and Future Financial Services is planning to merge both the entities to form a single SFB entity under the name 'Fincare Small Finance Bank'. Moreover, moving away from its current 90:10 ratio of unsecured and secured loans, as the SFB, the business will look at building unsecured and secured advances in the ratio of 60:40 over a five year period.

"We need to have a single structure company and therefore we will merge both our MFIs into a single SFB entity. As for the equity raising activity, we should be able to close the same by September this year," said Doshi.

Apart from microfinance products and secured and non-secured loans, the SFB operations will offer saving and investment products like savings accounts, current accounts and term deposits, among others.

While currently the group has presence in seven states including Gujarat, Madhya Pradesh, Rajasthan, Karnataka, Tamil Nadu, Andhra Pradesh and Maharashtra across 100 districts with around 215 offices, for the SFB operations, the group is looking at opening 100-odd branches, apart from also building business correspondents (BC) network as well as opening up satellite offices for door step servicing of MFI customers.

"We don't intend to foray into new states for the first one or two years and operate only from the existing locations. We will open 100-odd branches in the current geographies. Historically, we have expanded with an approach of contiguous area and that is how we will go about for the SFB operations as well," Doshi said while adding that the group will look for more than 25% of branches being opened in rural unbanked areas.

Meanwhile, even as it looks to close the current financial year with assets under management (AUM) worth Rs 2,300 crore, up from last year's Rs 1,500 crore, by end of financial year 2022, group AUM is expected to stand at Rs 20,000 crore. "Of these, the secured asset business would be about Rs 7,000-8,000 crore," Doshi added.