Chennai: City-based Madura Micro Finance (MMFL) will be fully acquired by another micro-finance institution CreditAccess Grameen (CAGL) for a total consideration of Rs 876 crore.
Bengaluru-headquartered CAGL will first acquire up to 76.2 per cent stake for Rs 666.4 crore in MMFL from its existing shareholders for cash and in the second stage, MMFL shall be merged into CAGL through a scheme of arrangement, the company said.
CAGL will acquire shares of MMFL Chairman and Managing Director Tara Thiagarajan, AVT Group, Elevar Equity Mauritius and other minority shareholders.
As part of the merger, the residual shareholders of MMFL will receive shares of CAGL at the share swap ratio proposed in the scheme of arrangement.
MMFL is the 11th largest NBFC-MFI in the country with gross loan portfolio (GLP) of Rs 2,053 crore in September quarter, which grew from Rs 1,860 crore in March quarter. MMFL's revenue for FY 2019 was Rs 375 crore and its profit after tax was Rs 81 crore. It has 11.1 lakh borrowers and 430 branches as on September 30, 2019.
CreditAccess had a GLP of Rs 7,905 crore in September quarter, which grew 36 per cent YoY. It’s quarterly disbursements grew 39 per cent and PAT by 37 per cent to Rs 101 crore. It has 26.4 lakh active borrowers and is present in 13 states.
“The acquisition strengthens our microfinance franchise which can be leveraged to provide innovative financial services and products matching the evolving needs of under-served and unbanked households,” CAGL Chairman, Paolo Brichetti said in a statement.
The business acquired from MMFL will continue to operate as a separate division until the integration of business and processes are complete. All employees of MMFL will become employees of CAGL upon merger.
“The acquisition represents an immense opportunity to build an even stronger operating platform and leverage innovations in technology, data and analytics for the benefit of low-income rural households,” MMFL’s Thiagarajan said. Thiagarajan will act as an advisor to the board of CAGL after the merger.
Industry experts find that the market would see more such consolidations happening in the future, given the difficulties in raising capital by small and medium MFIs. “Given the financial and liquidity concerns, more small MFIs could be acquired by larger firms. Smaller firms have to be unique to be able to raise capital and scale up. Else, they are likely to stagnate,” said Manoj Nambiar, Chairperson, Micro Finance Institutions’ Network.
