Business correspondents, which partner banks in their financial inclusion programmes, are planning to raise funds from private equity investors to scale up their operations.
SEED Financial Services, a business correspondent for 19 banks including State Bank of India (SBI), plans to raise $5.5 million from private investors by selling a part of its stake. The Delhi-based company is currently in talks with domestic and foreign investors and aims to raise the funds by the end of June.
“We are cash-positive now. But we need this capital to scale up our operations, build infrastructure and augment our resources,” SEED Financial Services Managing Director, Anirban Roy, told Business Standard.
Financial Information Network and Operations Limited (Fino), a Mumbai-based business correspondent, raised about Rs 150 crore from a group of investors, including private equity investors. The company also received fresh offers from private equity investors for additional funding. “We have received offers for fresh funding. We hope to finalise the deals in the next month,” said Fino Chief Executive Officer, Manish Khera. He, however, declined to provide the details.
A Little World, a business correspondent for SBI, raised about $8.5 million from Dubai's Legatum Group and Hyderabad-based Caspian Advisors. It also sold 20 per cent stake to SBI for Rs 80 crore. “We need more funds to meet our growth targets. We have started discussions with private equity investors,” said a senior official from A Little World. He added the funds would be invested in strengthening the company's research and development capabilities.
Industry players say with the government's emphasis on financial inclusion, investors expect high returns from business correspondents in the long term. The government has chalked out an ambitious plan of providing banking services in 73,000 villages (with a population of 2,000 or more) by March 2012. Banks have appointed business correspondents to provide financial services in rural villages on their behalf.
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“Now, there is a lot more clarity, a lot more understanding on how this business works. People have started realising this business has huge potential. Hence, there is a lot of interest,” said the official from A Little World.
Some business correspondents, SEED Financial Services being an example, are also exploring listing options through initial public offerings (IPOs) to offer their investors an exit route. “We are looking at an IPO. It is not likely to happen immediately, but after three or four years,” said SEED Financial Services’ Roy.