ICICI exits Bhartiya Samruddhi Finance

After getting an equity capital of Rs 118.2 crore in the third round of capital infusion at March-end, Bhartiya Samruddhi Finance (BFSL), a microfinance company, will go in for another round of equity infusion in 2011 to support business growth.

Earlier, the company had gone through two rounds of fund-raising in the last 10 years. A BFSL official said the earlier investors – Shore Capital and ICICI Bank, who made their investments in 2001 - have sold their stake in the company. He, however, did not elaborate on pricing for the sale transaction.

In the third round, Matrix Partners India has invested Rs 100 crore as lead investor and will hold 18 per cent stake in BFSL. Other two investors are Hivos Triodos Fonds (Rs 12.7 crore) and Lok Capital (Rs 5.5 crore). The net worth of BFSL, a part of the BASIX group, was about Rs 205 crore at March-end. The investment transaction was a combination of capital expansion and secondary sale.

Vijay Mahajan, chairman of BSFL, said, “With this capital infusion, we will double our credit portfolio to over two million customers and the outstanding loan portfolio to Rs 2,000 crore.”

At March-end, its capital adequacy ratio (CAR) was 25 per cent, more than double the Reserve bank of India’s minimum prescribed 12 per cent for non-banking finance companies. It expected to earn a profit of Rs 28-30 crore in financial year ended 2009-10 as against Rs 8 crore in 2008-09, he said. Next year, its CAR will increase to 15 per cent from April 2011.

As the microfinance company expects to double its asset portfolio, CAR may touch the regulatory minimum of 12 per cent. The expanded capital will support growth till about the end of this year. The company would look at another round of capital infusion by the same time next year, Mahajan said.

Sajeev Viswanathan, managing director & chief executive officer, BSFL, said fresh capital would have a direct impact on reducing cost for our customers. The company will cut the annual lending rate by at least 100 basis points.

Its yield on advances is about 22-23 per cent, and its cost of funds is 12-13 per cent. Its gross non-performing assets (NPAs) are about 1.5 per cent. It followed the 90-day norm for classifying an account as NPA, said another BFSL official.

Hyderabad-based Intellecap, which provides investment banking services to microfinance and other socially-relevant businesses, acted as BSFL's sole advisor to the issue.