Bhartiya Samruddhi to raise Rs 1,200 cr

Bhartiya Samruddhi Finance, a microfinance institution promoted by social entrepreneur Vijay Mahajan, plans to raise up to Rs 1,200 crore through debt instruments, including non-convertible debentures, in the current financial year. The funds would primarily be used to meet the micro-lender's working capital requirements and fund business growth in regions outside Andhra Pradesh.

“We are exploring opportunities to raise funds through debt instruments. Currently, we are not looking at equity infusion,” said Chief Executive Officer, Manmath Dalai. He, however, declined to quantify the size of funds the company aimed to raise in the current financial year.

“We are not looking at increasing our debt burden. The funds would primarily be used to replenish our working funds. This is because we feel our working funds may shrink, since we continue to repay our existing debts. We have started discussions with our banks and a couple of new investors,” Dalai said. The announcement comes at a time when banks have squeezed lending to microfinance companies following a crisis in the sector. However, a source privy to the development said, “Banks are ready to provide additional credit because of the strength of the company's balance sheet and the large share of its non-Andhra Pradesh business.” He said banks would offer the loans at a higher cost, and this may squeeze the company's margin in the current financial year. The interest rates on fresh loans are expected to be at least 200 basis points higher than what they were a year ago.

Bhartiya Samruddhi Finance had earlier opted out of the debt restructu-ring programme for microfinance institutions. The company's current debt is estimated at Rs 1,263.20 crore. Besides Andhra Pradesh, the company also offers micro loans in 16 other states.

Industry sources said a few foreign institutional investors have already expressed interest in investing in the debt papers that Bhartiya Samruddhi Finance plans to float in the current financial year. Indian debt papers are more attractive to overseas investors, compared to debt papers in other emerging markets, since they offer higher returns.