 "Ananya Birla, Svatantra")
The big-ticket acquisition of Chaitanya India Fin Credit by Ananya Birla-controlled Svatantra Microfin comes when non-banking finance companies (NBFCs) working as microfinance institutions (MFIs) have increased their market share, overtaking banks.
Also, this deal is not a precursor to a consolidation wave as growth opportunities abound in the sector, according to MFI industry executives and bankers.
This acquisition, though a significant transaction, is not an indicator of mergers and acquisitions (M&A) becoming the norm.
Sachin Bansal-led Navi Group sold Chaitanya because it wanted to pursue larger business ambitions in banking and financial services. There could be instances of M&As driven by the need to expand into some geographical territory, MFI executives added.
According to the Microfinance Institutions Network (MFIN) data, last financial year (FY23) saw NBFC-MFIs overtaking banks in market share in microfinance loans. While NBFC-MFIs increased their market share to 40 per cent at the end March 2023, up from 35.2 per cent in March 2022, that of banks went down from 40 per cent in FY22 to 34 per cent in FY23.
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Alok Misra, director, MFIN, said there was enough room for players to grow. NBFCs have increased market share after a revision in norms. The Reserve Bank of India has harmonised regulations and so players across categories -- universal banks, small finance banks, NBFC-MFIs etc -- are playing by the same rules, Misra added.
The gross loan portfolio (GLP) of NBFC-MFIs rose 38.7 per cent year-on-year (Y-o-Y) to more than Rs. 1.31 trillion at the end of March 2023 from Rs. 94,570 crore at the end of March 2022, according to the MFIN.
Jiji Mammen, executive director and chief executive officer, Sa-Dhan, said there was a huge gap in demand for credit and supply, affording room for all players.
The preliminary data suggests the loan portfolio of MFIs grew 20 per cent Y-o-Y in the quarter ended June 2023 (Q1FY24).
The asset quality is robust with bad loans nearing just 1 per cent. Private-equity investors have renewed their interest in lending to MFIs.
Listed NBFC-MFIs back in the black in Q1
NBFC-MFIs are back in the black in the quarter ended June 2023 (Q1FY24) with net profits of Rs. 676.2 crore as against a loss of Rs. 215.8 crore in the same quarter a year ago. This was driven by a 69 per cent rise Y-o-Y in net operating income at Rs. 1,721 crore. They posted a sharp drop of 75.3 per cent Y-o-Y in provisions and writeoffs at Rs. 196 crore in Q1FY24, according to analysis based on the data compiled by the BS Research Bureau.
