Trident keeps fund raising on hold

The controversy surrounding microfinance institutions (MFIs) has placed hurdles in raising capital for private equity (PE) and other investors. Trident Microfinance, the Andhra-based lender, has kept its equity raising plan on hold.

The events of recent months had impacted business. However, the company had not scrapped plans for fund raising. It was still in communication with prospective investors, said promoter and Chief Executive Officer Puli Kishore Kumar.

In an effort to grow business, it planned to raise Rs 75 crore through equity from high net worth individuals (HNIs) and two existing investors. According to the initial plans, the first tranche of Rs 30 crore was expected by September-end and balance funds before March next year.

MFIs in the state have been hit hard as the state government has tightened noose around them. It issued an ordinance to control the activities of non-banking finance companies (NBFCs) engaged in microfinance lending after a controversy broke out over their governance issues and recovery practices. The sudden sacking of SKS Chief Executive Suresh Gurumani by the board triggered action.

He said for the last one month, there were no disbursements and the collections had fallen. Banks had slowed funding to MFIs. Though activity in Andhra was down, operations in other states were normal.

The company’s microfinance portfolio is about Rs 160 crore, with a capital base of Rs 25 crore. It caters to 200,000 borrowers.

With assets past Rs 100 crore, the company has become a systemically important, non-deposit taking NBFC. Therefore, it will need to maintain a capital adequacy ratio of above 15 per cent till March next year.