Birlas eye stake in NBFC with small bank nod

Mumbai: Even as the RBI remains reluctant to allow business houses to float banks, some of the big names in India Inc are mulling a circuitous route to have a presence in the banking space. Top corporates are eyeing a stake in unlisted Au Financiers, a Jaipur-based non-banking finance company (NBFC), which is one of the 10 entities that got RBI’s nod last September to start small finance banks (SFBs).
Foreign shareholders, including Warburg Pincus, ChrysCapital and IFC, currently own 64% in Au Financiers, which, according to the RBI rules, has to be below 49% for it to float an SFB. Several domestic investors, including subsidiaries of Aditya Birla Group and Tata Group are understood to be in race to buy a stake in the company, which is being offered through the private placement route.
Although merchant banking sources said companies from these two business houses have shown interest, a spokesperson for the Aditya Birla Group declined to “respond to market speculation” while a Tata group spokesperson denied any such move after the group withdrew from race to float a bank last year.
The foreign holders who are diluting 15% in the NBFC are looking at mobilizing about Rs 750 crore, valuing Au Financiers at around Rs 5,000 crore. Several other domestic investors have also evinced interest for a stake in the company. Entities belonging to the ICICI Bank group, Enam Holdings and India Value Fund are also interested in a stake in the company, sources said. The offer, which is expected to close on Friday, is being managed by Kotak Mahindra Capital, sources said. Spokespersons for Au Financiers and Kotak Mahindra Capital declined to comment.
Once the foreign holding in Au Financiers is reduced to comply with the RBI’s rule for floating an SFB, the company, which has been in the business since 1996, would go for an IPO to meet the central bank’s net worth requirement for these new types of lenders. Recently, two microfinance companies which too got the RBI nod to float SFBs—Bengaluru-based Ujjivan Financial Services and Chennai-based Equitas Holdings — went public.