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Exclusive: RGVN North East Microfinance lines up new investors


RGVN (North East) Microfinance Ltd has raised capital from domestic investors to meet the central bank’s norms essential for the company to transition to a small finance bank, two people close to the development said.

The microlender was one of 10 applicants that got the Reserve Bank of India’s in-principle approval in September 2015 to start a small finance bank. Small finance banks form a new category of lenders allowed by the central bank to push financial inclusion in the country.

The Guwahati, Assam-based lender joins several other microfinance firms such as AU Financiers and Utkarsh Microfinance in raising capital to meet the RBI’s norms.

RGVN has lined up Rs 146 crore ($21.5 million) to meet the RBI’s requirement of small finance banks having a minimum paid-up capital of Rs 100 crore and for the promoters to be Indian residents, a company spokesperson said.

Investors participating in this round include SIDBI Venture Capital and Ratan Naraoji Tata Trust, which put in Rs 40 crore each, the spokesperson said.

Siddhesh Capital invested Rs 20 crore, SIDBI Rs 15 crore, IDBI Rs 10 crore, Norwegian Microfinance Initiative Rs 9 crore and Dia Vikas Capital put in Rs 6 crore.

SIDBI Venture Capital, the Tata Trust, Siddhesh Capital and the Norwegian investor will put money in the first tranche. The second tranche will close by March 2017.

SIDBI first invested in RGVN in 2012 while Dia Vikas Capital has been investing in the firm since 2011 and participated in every subsequent round in 2012 and 2014, as per VCCEdge, the data research arm of News Corp VCCircle.

RGVN, short for Rashtriya Gramin Vikas Nidhi, was established to carry out microfinance activities in the northeastern region of India in 2008, according to its website. The lender has 133 branches in Assam, Arunachal Pradesh, Meghalaya, Nagaland, Tripura, West Bengal and Sikkim with 3.39 lakh borrowers.

It had an outstanding loan amount of Rs 609 crore as of September 2016, the company said. Its on-time repayment rate is 99.54%, its website said. The firm reported net sales of Rs 45 crore in 2014-15, according to VCCEdge.

Small finance banks
In addition to RGVN, the RBI has also allowed Janalakshmi Financial Service, Disha Microfin, ESAF Microfinance and Investments, Suryoday Micro Finance, Ujjivan Financial Services, Utkarsh Micro Finance and Equitas Holdings to start small finance banks

Chennai-based Equitas and Bengaluru’s Ujjivan floated their public issues earlier this year. Equitas' share price has shot up 60% while Ujjivan shares are worth over two times what they were at the time of the IPO, as reported previously by VCCircle.

PE-backed AU Financiers received formal approval to start a small finance bank in October 2015 and must commence operations by next April. The firm has been meeting with investment banks for an IPO, as reported by VCCircle previously.

Utkarsh Microfinance and Suryoday  Microfinance have also been raising private capital to meet RBI guidelines.

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Norwegian Microfinance Initiative is a private equity and venture capital firm with $100 million assets under management. It provides capital to microfinance institutions both directly and through microfinance investment vehicles in developing countries. The firm was founded in 2008 and is based in Oslo, Norway.

Dia Vikas Capital is a 100% subsidiary of global microfinance and enterprise development services provider Opportunity International Australia. The company provides microfinance services to the families from the bottom of the pyramid. It is headquartered at Gurgaon (NCR) Haryana.

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