Microfinance provider Arohan plans to merge the lending operations of promoter company IntelleCash with itself. The merger is expected within this fiscal (FY18).

The move will enable Arohan to widen its portfolio offerings to include merchant cash advances.

Currently, IntelleCash’s lending portfolio of ₹25 crore is restricted to Mumbai. Plans are afoot to introduce these, through Arohan, here and other States.

Merchant cash advances refer to providing loans to small shopkeepers, kirana shops, restaurants and so on. The loans are recovered by the use of card-swipe machines — every time a sale is made and a credit/debit card is swiped, part of the proceeds goes to the loan provider.

According to Manoj Kumar Nambiar, Managing Director, Arohan Financial Services, requisite shareholder approvals have already been obtained. The matter will now be placed before regulatory authorities.

“The merger of IntelleCash’s merchant cash advances business with Arohan should happen latest by the end of this fiscal,” he told BusinessLine .

Mumbai-based IntelleCash began operations as a non-banking financial company in 2009, and acquired and consolidated its retail lending portfolio with Arohan in September 2012.

IntelleCash, along with Aavishkar Venture Management Services (both part of Aavishkaar-Intellecap Group), hold 32 per cent in Arohan.


Arohan’s loan outstanding stood at ₹1,015 crore in FY17, and Nambiar says the MFI will look to nearly double its portfolio to ₹2,000 crore by FY18.

Disbursals too are expected to increase over 85 per cent to ₹2,400 crore this fiscal, from ₹1,300 crore in FY17.

While Nambiar maintains that the liquidity crisis post the demonetisation has improved, he says trickle-down effects are visible in some pockets.

He even does not rule out the possibility of increasing loan defaults. Accordingly, an additional provision of ₹10-20 crore is being created.

“We are not in all the States that have been badly hit by demonetisation,” he added.

Arohan, already present in West Bengal, Bihar, Jharkhand, Odisha, Assam, Meghalaya and Chhattisgarh, will now look to expand to Tripura and Uttar Pradesh.

In Uttar Pradesh, it will target the eastern region, which has been less affected by demonetisation.

Plans to enter Madhya Pradesh have been put on hold. “The State is yet to fully recover from the effects of demonetisation.”

The MFI recently raised ₹155.5 crore from existing and new investors; a part of the funding will be used for expansion purposes.

Going cashless

Meanwhile, the firm has taken lessons from demonetisation and is exploring cashless disbursal of loans.

Under the system, the loan amount will be sent directly to the account of the customer. It has tied up with Paytm Payments Bank on a pilot basis in two Kolkata branches.

Similarly, cashless loan repayments will also be explored at a later stage.