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After lukewarm response to Spandana IPO, other MFIs re-evaluate IPO plans




Nearly a decade after shelving its initial public offering (IPO) plans, Spandana Sphoorty, a Hyderabad-based microfinance institute (MFIs), hit the capital market on August 5. The Rs 1,200 crore IPO was overall subscribed 1.05 times on the final day.

While the Spandana IPO managed to sail through, other MFIs are now once again re-evaluating the prospects of going for an IPO, given the choppy markets and lukewarm response of retail investors to the Spandana IPO. Only about 10 per cent of the shares in the IPO were subscribed by retail investors.

In the next few quarters, at least two other MFIs, Arohan and Muthoot Microfin are planning for an IPO.

According to Sadaf Sayeed, CEO, Muthoot Microfin, the MFI will evaluate its plans to go for an IPO in the next two months based on the market situation. The MFI had obtained Securities and Exchange Board of India’s (Sebi) approval for an IPO last October, and the licence is valid for one year. The MFI was earlier planning an IPO around January-February, but it postponed the plans due to unfavourable capital markets.

“We are evaluating the situation, and will go for an IPO in next two months if the market situation improves. The present market condition is not too conducive for an IPO,” said Sayeed.

While Arohan has been contemplating an IPO since the last year, it’s looking at for beefing up capital through alternative sources.

“We are hopeful of filing an application for an IPO by Q4 of this year. At present we are internally doing a rejig of promoters’ holding, which is set to increase from nearly 33 per cent to 38 per cent ahead of the IPO. The proceeds will help us expand in newer geographies. The market is not buoyant now, and ideally one needs to wait for more stability before going for an IPO,” said Manoj Kumar Nambiar, managing director, Arohan.

As some of the top MFIs grow in size, beyond Rs 3,000 crore in terms of credit outstanding, many have been seeking to opt for an IPO.

Last year, CreditAccess Grameen got listed on the exchanges. Apart from this, Satin Creditcare Network is the other listed microfinance company after IndusInd Bank acquired Bharat Financial Inclusion in June.

After Bharat Financial, CreditAccess Grameen is the largest MFI, followed by Satin and Arohan, according to data available with Microfinance Institution Network (MFIN).

According to a top executive in the MFI sector, several mid-sized MFIs could also be thinking of tapping capital markets for funding. However, they are now seeking other ways of raising capital, mostly qualified institutional investments, due to adverse market conditions.

The MFI industry has been growing rapidly in the last few months. The industry’s gross loan portfolio (GLP) stood at Rs 1,87,386 crore at the end of March, up 38 per cent year-on-year, according to MFIN data.

This apart, several small finance banks would need to mandatorily go for an IPO in the next few months to comply with Reserve Bank of India norms, which specify that a finance bank must be listed within three years of the launch of operations.

So far, three SFBs have listed on the stock markets — Equitas Financial Holdings Ltd, Ujjivan Financial Services Ltd and AU Small Finance Bank. Seven other SFBs would need to mandatorily go for an IPO.

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Sitharaman’s sops for NBFCs may perk up lending, ease liquidity stress



Illustration by Binay Sinha

To further ease the liquidity stress in the non-banking sector and nudge them to revive their lending activities, Finance Minister (FM) Nirmala Sitharaman on Friday announced a slew of measures for non-banking financial companies (NBFCs) and housing finance companies (HFCs). The government hopes this will result in more credit support for purchase of houses, vehicles, and consumption goods.

The government has provided additional support of Rs 20,000 crore to the stressed housing finance companies from National Housing Bank (NHB). With this, the additional liquidity support for the HFCs from NHB has gone up to Rs 30,000 crore.

In the Union Budget last month, the FM had encouraged public sector banks (PSBs) to buy high-quality pooled assets of NBFCs up to Rs 1 trillion for which the government would provide a one-time six-month partial credit guarantee for the first loss of up to 10 per cent.

The Reserve Bank of India (RBI) had also chipped in by tweaking banks’ bond-holding norms. This will allow banks to borrow an additional Rs 1.34 trillion exclusively for buying such pooled assets and giving loans to NBFCs. The FM on Friday said this partial credit guarantee scheme will be monitored at the highest level in each bank. Through this, it is expected that many of the assets will get quickly pooled and NBFCs will receive the necessary liquidity. “NHB has already settled some of the issues. NBFCs are receiving money from the banks and are moving towards funding,” said Sitharaman.

Sanjaya Gupta, managing director, PNB Housing Finance, said “This will support growth and ease the liquidity crunch. HFCs will now get an additional Rs 20,000 crore from NHB. The initiatives have potential to kick start the real estate sector.”

The government has also permitted NBFCs to use Aadhaar-authenticated bank KYC to avoid repeating the same process when a customer approaches it for credit. This has been a long-standing demand. The necessary changes in the Aadhaar regulations and Prevention of Money Laundering Act rules will be made, the FM said.

“This will streamline the process and also reduce frauds,” said Raman Aggarwal, chairman, Finance Industry Development Council.

The government has also asked PSBs and NBFCs to fast-track their collaboration to provide credit to micro, small and medium enterprises, small traders, self-help groups, and micro finance industry client borrowers.

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PACL Case: Sebi panel invites expression of interest for 28,974 properties




A committee headed by Justice R M Lodha has invited expression of interest (EoI) from prospective buyers for a total of 28,974 properties belonging to PACL Group.

Market regulator Sebi had set up a committee headed by former Chief Justice of India R M Lodha following a Supreme Court order to refund money to investors in the matter of PACL Group.

As per the notice issued by Sebi, the committee has divided the total 28,974 properties belonging to PACL group in four zones — east, west, north and south — with maximum properties being located in the southern zone.

Regarding PACL properties, the apex court’s order dated July 30 observed “we also leave it open to the committee to receive any further offers and to explore them after duly publishing a further notice on the website,” the notice said.

In pursuance of apex court’s order, the committee “invites Expression of Interest from prospective buyers clearly indicating therein, list of properties in each zone, its circle rate, the offer amount and other relevant details,” the Friday notice said.

“The proposal should be for properties in each zone aggregating in value not less than Rs 1,000 crore,” the notice added.

The notice further said that the last date of receipt of proposals is September 9.

PACL, also known as Pearl Group, had raised Rs 60,000 crore from public in the name of agriculture and real estate businesses and was found by Sebi to have collected these funds through illegal collective investment schemes over 18 years.

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Improved market access for domestic retail investors with Aadhaar-based kYC



Markets, Investors, Indices, Stocks

The government will allow Aadhaar-based KYC for domestic retail investors, and necessary amendments to the rules under the Prevention of Money Laundering Act will be issued.

Announcing a slew of measures to boost the economy, the government said the Depository Receipt Scheme 2014 is expected to be operationalised soon by Sebi. “This will give Indian companies increased access to foreign funds through American Depository Receipt (ADR)/ Global Depository Receipt (GDR),” she said.

In order to improve market access for the domestic retail investors, Aadhaar-based KYC will be permitted for opening of demat account and making investment in mutual funds. In this regard, necessary notification for amendments in PMLA rules would be issued.

Besides, steps would be taken with regard to offshore rupee market.

“To bring offshore rupee market to domestic stock exchanges and permit trading of USD-INR derivatives in GIFT IFSC, Ministry of Finance is working with RBI to introduce this measure shortly,” the government said.

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