VFSL plans to raise funds from a PE firm

Kolkata-based NBFC-MFI, Village Financial Services (VFSL), is looking to dilute promoter’s stake to the extent of 10 per cent to raise funds from a domestic private equity (PE) firm.

The microfinance institution is currently wholly owned by the promoter, Kuldip Maity, who is also the MD and CEO, and the promoter group. The stake dilution is likely to take place within the next one month.

According to Maity, the amount raised will help fund the MFI’s growth plans. He, however, refused to divulge the amount he is likely to raise from the stake sale.

“The process of due diligence is at an advanced stage; we hope to be able to firm up something in the next 10-12 days,” Maity told BusinessLine on the sidelines of a microfinance summit organised by the Association of Microfinance Institutions – West Bengal (AMFI-WB) here. The MFI is also mulling the possibility of tapping the capital market with an initial public offering.

“To begin with, we are looking at this stake dilution to raise funds; IPO will follow later,” he said.

VFSL has been growing at over 60 per cent on a year-on-year basis. Maity had earlier mentioned that the company will need equity capital worth ₹200 crore over the next three years for maintaining an annual growth rate of 60-70 per cent. The MFIs total disbursements stand at close to ₹510 crore as on date. It raised close to ₹300 crore as debt from banks and NBFCs for funding its growth so far during this fiscal.

The MFI is hopeful of closing this fiscal with a loan book of ₹700 crore; this is likely to grow to ₹1,200-1,300 crore by March 2019. Its non-performing assets as a percentage to total advances is close to 0.33 per cent.

VFSL, Maity said, is looking to roll out products like housing and SME loans aimed at individual borrowers, and diversify into newer geographies to de-risk its portfolio.

According to him, the group lending model (which is currently in vogue) will not work in the next five years; individual lending is likely to pick up.

“We plan to roll out SME and housing loans to tap individual borrowers April onwards. We will start with our existing borrower base who have been with us for 3-4 years,” he said.

The MFI, which primarily operates in West Bengal, Bihar, Jharkhand, Odisha, Assam, Tripura, Sikkim and Uttarakhand, plans to expand to new geographies including Chattisgarh and Madhya Pradesh in the next one month, he said. The plan is to cover 20 States by 2020.

“Nearly 80 per cent of our business comes from Bengal; and this leads to concentration risk. We want to increase our presence in other States to de-risk our portfolio,” he said.

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