In one of the biggest deals in India's microfinance industry, Ananya Birla-led Svatantra Microfin Pvt Ltd has agreed to acquire Chaitanya India Fin Credit Pvt Ltd, a wholly owned subsidiary of Flipkart co-founder Sachin Bansal’s Navi Group, for Rs 1,479 crore (around $179.6 million).
The proposed acquisition will catapult Svatantra into the second-largest microfinance entity in India with a reach of more than 3.6 million active customers and combined assets under management of Rs 12,409 crore as on March 31, 2023, Svatantra said in a statement.
"The combined entity will command a substantial reach, enabling the delivery of a diverse array of financial services to our clients across a geographically diverse portfolio,” said Ananya Birla, founder and chairperson of Svatantra.
The deal for Chaitanya is the second and largest acquisition by Svatantra since 2018, when it bought Micro Housing Finance for Rs 300 crore.
Chaitanya Rural Intermediation Development Services Pvt. Ltd was founded in 2009. Bansal acquired Chaitanya for Rs 150 crore in October 2019 through Navi Finserv Ltd following his exit from Flipkart.
Since 2020, Chaitanya’s business has grown at a compounded annual growth rate of 77% year-on-year, increasing its book size from about Rs 900 crore in March 2020 to an AUM of over Rs 4,900 crore in March 31, 2023. Chaitanya now services 1.4 million customers across 12 states with over 6,000 employees in India.
“We have seen Chaitanya grow almost 6x in the last four years... This transaction is in line with our strategic plan to focus on our digital-first businesses, as we continue our digital-first financial services through the Navi Group,” said Bansal, Navi’s Chairman and CEO.
Last year, Bansal's attempt at getting a universal bank licence for Chaitanya was turned down by the Reserve Bank of India (RBI). This likely prompted Bansal to plan an exit from the microfinance business.
Presently, Chaitanya operates as a subsidiary of Navi Finserv, the non-banking financial company (NBFC) arm of Navi Technologies, whose proposed Rs 3,350 crore-IPO plan has been delayed amid market conditions despite regulatory approval in September last year. This was followed by Navi laying off 20% of its workforce, or around 250 employees, as per media reports last month.
Besides microlending through Chaitanya, Navi Group offers personal and home loans through Navi Finserv. It also runs the mutual funds platform Navi Asset Management Company and health insurance unit Navi General Insurance.
Svatantra is a decade-old microlender established in 2012 by Ananya Birla, the daughter of billionaire industrialist Kumar Mangalam Birla. It started operations in March 2013 and currently operates 1,517 branches with over 7,000 employees providing financing solutions to over 2.2 million rural and largely women entrepreneurs across 19 states.
Svatantra is majority owned by Ananya Birla with around 15.8% shareholding by Svatantra Holdings Pvt Ltd. It has also received debt funding from Northern Arc Capital, among others.
As on March-end 2023, it managed AUM of Rs 7,499 crore with a compounded growth rate is that of 118% between FY15 and FY23.
The transaction is likely to be completed by the end of 2023, subject to regulatory approvals.
JM Financial Ltd acted as the exclusive financial advisor to Navi for this transaction.
