IDFC Bank to buy India's VC-backed Grama Vidiyal
IDFC Bank, a division of Indian infrastructure lender IDFC, has agreed to buy non-banking finance company (NBFC) Grama Vidiyal Micro Finance, providing an exit for its VC backers.
According to a regulatory filing, Grama Vidiyal will become a wholly owned subsidiary of IDFC Bank. The purchase is intended to expand IDFC Bank's network by making Grama Vidiyal's 319 locations immediately available. Current customers of Grama Vidiyal are also expected to benefit from IDFC Bank's wider range of banking services. Financial terms were not disclosed.
Expansion is a priority for IDFC Bank, which received its banking license last October, making it India's newest commercial bank. The company said it has already received in-principle approval for the acquisition from the Reserve Bank of India, and it expects the deal to be finalized by the end of the year.
As a registered NBFC, Grama Vidiyal focuses on sustainable financial inclusion programs and the development needs of women and their families. The company had INR15 billion ($224 million) in loan assets under management as of March 2016. All loan assets will be transferred to IDFC Bank.
Grama Vidiyal's VC backers include Elevar Equity Advisors and MicroVest Capital Management. AVCJ Research shows the firms participated in a $4.25 million funding round for the company in 2009 along with the Amar Foundation, a California-based non-profit founded by VC investor Vinod Khosla.
"IDFC Bank intends to be a mass retail bank with a significant footprint and customer base in five years," said Dr. Rajiv Lall, founder and CEO of IDFC Bank. "For a young bank, however, it takes time to build its footprint. The acquisition of Grama Vidiyal not only fast-tracks the build-out of a retail network, but with technology intervention, enables the bank to deliver new age banking solutions at scale, thereby financially enriching the lives of people in both rural and urban geographies."
India's NBFC sector has gained considerable support in recent years from the country's government and regulators, which see the institutions as a way to reach customers not served by the traditional banking system and help them gain access to credit for their development.
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