Northern Arc Group to acquire SMILE Microfin

Northern Arc Group to acquire the microfinance business of S.M.I.L.E. Microfinance Ltd on slump sale basis to strengthen its retail finance business.

The transaction will involve the takeover of the microfinance portfolio of S.M.I.L.E., along with its network of nearly 150 branches catering to over 0.2 million customers.

Around 850 employees of S.M.I.L.E. will move to the rolls of the Northern Arc group upon the consummation of the transaction, Northern Arc said in a statement. The company did not provide details like deal value nor assets under management (AUM) of SMILE.

According to an ICRA report SMILE had total managed assets of Rs 460 crore at the end of September 2021.  The gross non-performing assets (NPAs) of 16.3 per cent and net NPAs of 3.3 per cent as of September 2021.

The acquisition is subject to the completion of a standard set of Conditions Precedent that are typical in such transactions.    

The acquisition will help Northern Arc to target the next billion in the rural finance business, through a digital and data-led platform. The Northern Arc Group has recently entered the retail finance business through two segments – rural finance and secured MSME finance. This business will capitalize on Northern Arc’s capabilities across domain know-how, underwriting track record, technology, data, and analytics.

It will be based on a phygital model – sourcing and assessment will be largely driven through technology which will be substantively backed by physical collection presence and infrastructure.