Northern Arc Capital, a diversified non-banking finance company (NBFC) focussed on under-served households and businesses, on Thursday announced that it has entered into an agreement to acquire Chennai-based SMILE Microfinance Limited through a slump sale.

The transaction will involve taking over of the microfinance portfolio of SMILE, along with its extensive network of nearly 150 branches catering to over two lakh customers. Around 850 employees of SMILE will move to the rolls of the Northern Arc group upon the consummation of the transaction, the IPO-bound Northern Arc Capital said in a press release.

According to its website, SMILE is engaged in providing micro-loans to women from poor segments of urban and rural Tamil Nadu.

Northern Arc Capital said that the acquisition is subject to the completion of a standard set of conditions that are typical in such transactions. However, the size of the transaction was not disclosed.

Focus on rural penetration

“We look forward to the SMILE team becoming part of the Northern Arc group. The acquisition is a critical step in the strategic direction that we wish to pursue. SMILE is one of the pioneers of the microfinance sector in south India and we intend to take advantage of their rural penetration and long-standing customer relationships to build and scale this business quickly,” Kshama Fernandes, MD and CEO at Northern Arc was quoted in the release.

The company said that the acquisition will help the Northern Arc group quicken its go-to-market in the rural finance business, where it plans to target the next billion by offering small ticket loans through a digital platform.

“The Northern Arc group’s aim is to offer small ticket loans though an efficient, agile and scalable digital platform to under-served rural and semi-urban areas of the country. We plan to build on the reach and capabilities of SMILE’s MFI business to build a high quality, high growth portfolio," Jagadish Babu Ramadugu, MD and CEO of Northern Arc’s Retail Rural Finance subsidiary, said in the press release.