BharatPe begins stake sale process in Unity SFB, appoints Rothschild
- The agreement was struck at the time a consortium of Centrum Financial Services Ltd and BharatPe acquired the small finance bank licence.
- Unity SFB is promoted by Centrum Financial Services and is backed by BharatPe’s parent, Resilient Innovations Pvt. Ltd, as the financial investor.
Mumbai: Fintech lender BharatPe is looking to sell anywhere between 10% and 25% stake in Unity Small Finance Bank, depending on buyer interest, two people with knowledge of the development said. The Peak XV-backed fintech firm holds around 49% stake in the small finance bank currently.
BharatPe is scouting for private equity firms and large family offices for the stake sale and has appointed investment bank Rothschild & Co. to help it look for buyers, the people cited above said on condition of anonymity.
“BharatPe is likely to sell more stake if more buyers line up," the first person cited above said, adding that as per its agreement with RBI, the NBFC (non-banking finance company) has to bring down its stake in Unity SFB to 10% by 2028.
The agreement was struck at the time a consortium of Centrum Financial Services Ltd and BharatPe acquired the small finance bank licence. Unity SFB is promoted by Centrum Financial Services and is backed by BharatPe’s parent, Resilient Innovations Pvt. Ltd (RIPL) as the financial investor.
The first person added that Unity SFB will also need to comply with RBI guidelines that no single stakeholder should have more than 10% stake before a financial entity like Unity goes for public listing. “Hence, BharatPe has decided to explore a stake sale," the first person added.
Also read | BharatPe settles with Ashneer Grover, to end all ties with former co-founder
Unity SFB, which has completed three years of operations, is required to go public after two more years. RBI’s norms require small finance banks to get listed after five years of operations.
The second person cited above said that Unity SFB is likely to be valued at more than $800-900 million. “Most small finance banks are trading at 1-1.5 times their books and, hence, that’s a safe ballpark to begin with," the second person said.
Meanwhile, a banker who spoke on condition of anonymity told Mint that the NBFC is finding it difficult to find buyers for the stake sale.
Emailed queries to Rothschild & Co, BharatPe and Unity SFB did not elicit any response.
BharatPe, too, is preparing for an IPO (initial public offering). In an interview to Mint on 4 August 2022, BharatPe’s chairman Rajnish Kumar had confirmed its plans for an IPO over the next two years.
He had also clarified the lender’s plan to transition from an individual-focused company to a professionally run entity, after its run-ins with former co-founder Ashneer Grover.
Also read | Delhi HC orders arbitration in Ashneer Grover-BharatPe confidentiality violation case
In September last year, BharatPe reached a settlement with Grover, ending years of acrimonious legal battles and public disputes between the two parties. As part of the agreement reached, Grover will not be associated with BharatPe in any capacity nor be a part of the shareholding of the company.
The background
Centrum Financial Services was granted a small finance bank licence by the RBI in November 2021, paving the way for it to take over the crisis-ridden Punjab and Maharashtra Cooperative (PMC) Bank.
The multistate cooperative bank was put under RBI’s directions in September 2019 after serious corporate governance lapses came to light.
The Centrum group’s lending businesses, housed under CFSL and Centrum Microcredit Ltd (CML), were transferred to Unity SFB through a business transfer agreement.
The performance
BharatPe turned Ebitda positive in October 2024 and recorded consolidated revenue from operations of ₹1,426 crore in FY24, compared to ₹1,029 crore a year ago, according to a statement from the company last October. Ebitda refers to earnings before interest, tax, depreciation and amortization.
Its consolidated loss before tax stood at ₹474 crore compared to ₹941 crore a year ago. The company expects to turn profitable by the end of the current fiscal year.
Also read | Unity SFB to pay PMC depositors immediately
Meanwhile, as per an August 2024 ratings release by Crisil, Unity SFB turned profitable in fiscal year 2022-23, reporting net profit of ₹35 crore, as against loss of ₹150 crore a year ago. The profits further grew to ₹439 crore in fiscal 2023-24 both on account of the growing loan book as well as benefit of reversal in provisioning cost on the technically written off assets of PMC Bank.
The bank’s assets under management (AUM) excluding the PMC book grew to ₹8,569 crore as on 31 March 2024 against ₹4,694 crore during the corresponding period a year ago. The deposit base increased to ₹6,505 crore at the end of March 2024 from ₹2,684 crore a year ago. The bank’s capital-to-risk weighted assets ratio (CRAR) stood at 36.4% as on 31 March 2024.
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