Home IPO arohan financials: Arohan Financials sheds IPO renewal plan, to raise equity from PE investor

arohan financials: Arohan Financials sheds IPO renewal plan, to raise equity from PE investor

by Chris Williams
Microfinance lender Arohan Financial Services has decided against refiling for an initial public offer (IPO) amid market weakness and is instead in talks with private equity investors to raise nearly Rs 1,900 crore through primary and secondary deals.

“We are not going to refile for IPO as of now as the market situation is not conducive for the lenders. The full benefits of new central bank pricing deregulation and credit harmonization will reflect in this business year,” Arohan Managing Director Manoj Kumar Nambiar told ET.

The Aavishkaar Group-owned NBFC-MFI is working to close a private equity round, he said. Some existing group investors would also raise their investments in this round.

Besides subscribing to fresh issues of equity shares, the PE investor is likely to top up its investment through secondary market transactions. Early investors in Arohan, such as Aavishkaar Goodwell Fund-II (AG-II), Tano Capital and Michael & Susan Dell Foundation, will look to exit, Nambiar said, adding that the size of the secondary transaction would be around Rs 500 crore.

Arohan gave up plans to mobilise Rs 850 crore through the primary issue in IPO due to concerns over asset quality, people aware of the matter said. Its gross non-performing assets ratio was at 4.6%, Nambiar said. There was also an offer for sale to existing investors.

The validity of the IPO ended in the last week of April. Initially, the lender was contemplating refilling, but choppy equity markets following soaring inflation and tightening of monetary conditions forced it to drop the plan.

The promoters hold 34.32% in the NBFC-MFI. AG-II owns about 20% of the company, with Tano and the Dells owning 14% and 2.7%, respectively.

The microfinance market has recovered, with the sector showing 10% portfolio growth year-on-year to Rs 2.85 lakh crore at the end of March 2022. However, rising commodity prices have become a cause for concern as these affect disposable incomes of borrowers impacting collection efficiency for the lenders, people close to the development said.

According to data released by Microfinance Institutions Network (MFIN), the sectoral portfolio at risk even after 90 days of due date was 10.49% of total gross loan portfolio.

Simply put, nearly Rs 30,000 crore of loans remained sticky even 90 days after the due date.

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