IFC to make an equity investment in PE-backed Ratnakar Bank

International Finance Corporation (IFC) is planning to make an equity investment of Rs 130 crore in PE-backed Ratnakar Bank Ltd, through a preferential allotment, subject to IFC’s Board and Indian regulatory approvals. It may be noted, the bank is in the process of raising around Rs 325-330 crore through the preferential issue route from five to six investors. The bank may look at IPO also post the equity raising.

According to the Corporation, the project is in line with IFC’s strategy of supporting financial inclusion and providing access to finance to MSMEs. The project intends to support a small bank in scaling up its business and give a strong market signal for foreign investment.

IFC investment will help the Bank to augment its capital base and to prepare it for Basel III implementation and growing its assets, increasing its reach and improving its market share especially in the MSME space, said the Corporation.

Established in 1943, RBL is a Kolhapur based small sized old private sector bank. It was granted the status of a scheduled commercial bank in 1959. It was established as a commercial bank with the core objective of catering to the needs of small and medium businesses. The Bank grew its branch footprint across Maharashtra, Karnataka, Goa with a small presence in Delhi and Gujarat – the focus continued on small and medium businesses.

Currently, the bank serves the trading, agriculture & manufacturing sectors through 1,750 employees, 117 branches and 158 ATMs. The Bank's customer base is largely semi-urban and rural, with a judicious mix of urban customers. It has a client base of over 400,000 customers across wholesale, consumer/retail banking and financial inclusion verticals.

The bank is being led by a new management group since July 2010. The new management, from leading foreign and private sector banks in India, joined the bank under the leadership of Mr. Vishwavir Ahuja, the current MD& CEO (ex CEO of Bank of America in India), with a shared mission and are aligned through equity participation.

The bank has a diversified shareholder base with 40% held by retail shareholders and 60% held by professional and institutional investors. The institutional investors include Beacon India Private Equity Fund, Cartica Capital, Faering Capital, Gaja Capital Partners, HDFC Ltd, Norwest Venture Partners, and Samara Capital.

The Bank is headquartered in Kolhapur with its corporate office in Mumbai and has a strong regional footprint, with its existing branch network spread over Maharashtra, Karnataka, Goa, Gujarat, and Delhi States and Union Territory of Dadara Nagar Haveli.

Increased access to finance for Micro, Small, Medium Enterprises (MSMEs) sector - The investment will support RBL focus on growing its business in the micro, small and medium businesses, and agriculture sectors.

By fiscal 2016, RBL intends to grow advances to Micro & Small Enterprises segment from Rs 40 crore in fiscal 2012 to Rs 450 crore. Also, the Joint Liability Group (JLG) loans is expected to increase from Rs 23 crore in fiscal 2012 to Rs 1,000 crorein fiscal 2016. The bank's growth strategy also involves increasing its women borrowers from around 10,350 in fiscal 2012 to 450,000 in fiscal 2016.

IFC's involvement will also help the Bank to build institutional capacity through best practice tools and standards targeting the SME segment, helping the bank to grow in trade finance, hellping to prepare the bank for a potential IPO and helping to explore other sources of funding and facilitating development of a social and environmental management system for sustainable development of the business.