PE-backed Arohan Financial Services files for India IPO

The company will issue INR8.5 billion ($116.5 million) in new shares, while the likes of Maj Invest, the Michael & Susan Dell Foundation (MSDF), Tano Capital, TR Capital, and Aavishkaar will make partial exits, according to a prospectus. Shares to be included in the secondary offering amount to just over half of Arohan’s pre-offer equity share capital. Pricing terms for the IPO have yet to be set.

Aavishkaar is the largest shareholder in the business with a 49.75% stake held through several entities. Tano, Maj Invest, TR, and MSDF own 14.07%, 12.82%, 8.09%, and 2.72%, respectively. Other significant investors in Arohan include Ask Group.

AVCJ Research’s records show that MSDF first backed Arohan in 2008 and has re-upped several times. Caspian Capital Partners and Lok Capital were among the other early investors. Aavishkaar – an experienced microfinance practitioner – took a majority interest in the company in 2012 for INR520 million following a coercive lending practices scandal that brought the industry to its knees.

Tano bought a 30% stake in 2015 for INR600 million and then a group of investors – including Maj Invest, MSDF, Tano, and Aavishkaar – committed INR1.56 billion in 2017. Secondaries specialist TR arrived a year later, paying INR1 billion for a 10.5% interest and facilitating partial exits for Tano and Aavishkaar. This was followed in 2019 by a INR1.3 billion round featuring Maj Invest, MSDF, Tano, and TR.

When Aavishkaar first got involved with Arohan, the company had around $6 million in assets and was available at a discount. Manoj Kumar Nambiar, an experienced banker, was brought in to run it.

“Manoj made it profitable in 45 days,” Vineet Rai, founder of Aavishkaar, told AVCJ last year. “Today it is the fifth-largest microfinance institution in India with around $700 million in assets and 7,000 employees nationwide. It is a very data-savvy company, with 100% of loans dispersed electronically and 54% of loans collected electronically.”

Arohan is India's fifth-largest non-banking finance company MFI in India by gross loan portfolio, which stood at INR48.57 billion as of September 2020. It serves 2.21 borrowers across 17 states, including 12 that are classified as low income. There are 710 MFI branches nationwide and a further 10 that are part of Arohan’s micro, small and medium-sized enterprise (MSME) lending network.

The company provides income-generating loans and other financial inclusion-related products to customers who have limited or no access to financial services. These are typically term loans and life and health insurance products.

Gross disbursements amounted to INR49.9 billion in the 2020 financial year, up from INR46.8 billion 12 months earlier. Over the same period, net interest income rose from INR3.2 billion to INR4.8 billion, contributing to an increase in overall income from INR6.5 billion to INR9.3 billion. Net profit came to INR1.27 billion in 2020, roughly on par with the previous year.

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• Topics
• South Asia
• IPO
• Financials
• India
• Financial Services
• Aavishkaar Capital
• Tano Capital
• TR Capital
• NBFCs