ESAF to raise Rs 300 cr for small finance bank

Thrissur-based ESAF Microfinance is planning to raise around Rs 300 crore to support its Small Finance Bank operation, for which it has got a licence.
 
The new SFB is expected to start operating by mid-February 2017. ESAF says the aim is to make profit in the first year itself; it will be listed on the exchanges in due course.
 
The proposed fund raising is to support the investment in branches, people and information technology, said K Paul Thomas (pictured), chairman and managing director. Consultancy entity EY has been hired for this change to an SFB, which will be a subsidiary of the micro finance company.
 
ESAF has around 1.15 million customers currently, with a book size of around Rs 2,500 crore. Over the next five years, the plan is to have around 500 branches (it now has 260, in 11 states). “By 2020, our vision is to have Rs 20,000-crore book size, with three million customers. To support all this, the company would require capital and we will start the process by the first quarter of 2017-18, to raise around Rs 300 crore,” said Thomas. He added they were looking for a purely financial investor. The company plans to open 85 new branches before September 2017, mainly to mobilise retail (small deposit) business. This would call for an investment of around Rs 20 crore.
 
Thomas said the challenge was in the training of people. As an MFI, it was in a ‘pull’ market, as opposed to one where products need to be pushed to the customer, as it is now embarking on.
 
It has around 3,500 employees and plans to add another 5,000 in the next five years.
 
According to VCCircle data, Samridhi Fund, Dia Vikas Capital and Oikocredit International have invested $11.6 million (Rs 79 crore) in the company.
 
ESAF raised its seed fund from Grameen Trust, part of the Nobel Prize-winning Grameen Bank, a Bangladesh-based winning micro finance organisation and community development bank.