Hyderabad-based three major microfinance institutions- Share Microfin Limited, Asmitha Microfin Limited and Spandana Sphoorty Financials- are likely to be merged.
A proposal to this effect has been put forth by the three MFIs before the Reserve Bank of India's Corporate Debt Restructuring (CDR) Empowered Group.
"The CDR package has been approved for all the three MFIs and there is a possibility that these three will be merged," a top MFI official, who declined to be identified, told Business Standard.
Spandana Sphoorty's managing director Padmaja Reddy, however, said that the MFIs were exploring various options and merger was one them. "These are at the very initial stage. It is a long process. We need to take approvals from the bankers and other investors before going in for the merger. We will focus on the merger aspect after the execution of the CDR package by September 15", she said.
Share Microfin has the second highest exposure in the CDR programme with loans of about Rs 2,160 crore. Spandana Sphoorty's CDR exposure stands at Rs 2,000 crore while Asmitha's at Rs 1,234 crore.
Microfinance companies have been struggling in the state since the Andhra Pradesh government came out with an ordinance in October last year and later made it into an Act to 'check' the coercive recovery practices of the MFIs.
Following the promulgation of the Andhra Pradesh Microfinance Institution (Regulation of Money Lending) Act on January 1, 2011, there have been no new borrowers. The frequency of repayments too have changed from weekly to monthly.
Consequently, the three MFIs have to go for CDRs. The total outstanding loans in AP by MFIs is about Rs 6,000 crore. while banks exposure to MFIs in the state stands at Rs 5,000 crore.
Meanwhile, another Hyderabad-based MFI, Trident Microfin, which has an exposure of Rs 125.70 crore, expects its restructuring to go through soon. "We had a joint lenders meeting recently where we discussed the proposal. We are yet to sign the Master Restructuring Agreement," said Trident Microfin managing director P Kishore Kumar. Trident has 18 lenders.
