Warburg Pincus on Monday said an affiliate of private equity funds managed by the New York-based firm will acquire a majority stake in India’s Vistaar Finance, which lends to small and medium businesses in the country.
While Vistaar declined to disclose the terms of the agreement, a Reuters story in September said the deal would be for a 30% stake for $150 million. Accordingly, the deal is expected to value Vistaar at roughly $450 million.
The acquisition will give an exit to Vistaar Finance’s existing investors WestBridge Capital, Elevar Equity, Omidyar Network India, and Saama Capital, the company said.
“We believe micro-enterprises in semi-urban and rural India are underserved by formal sources of credit and we believe Vistaar has the potential to fulfil that need gap and be a driver for broad-based growth in those regions and communities,” said Narendra Ostawal, managing director, Warburg Pincus.
Founded by Brahmanand Hegde and Nishtala in 2010 and based in Bengaluru, Vistaar Finance claims to manage assets worth Rs2,600 crore ($315 million) and provide secured loans to micro, small and medium enterprises (MSMEs) across 12 states with 205 branches and over 2,100 employees. It has around 35,000 active customers.
According to media reports, for the fiscal year to March 2022, Vistaar recorded a net profit of $9.3 million, 14.5% more than in 2021, according to credit rating firm ICRA. Its total income stood at $54 million in the period.
In April, the company raised Rs150 crore from public sector lender Bank of Baroda.
According to data from TransUnion Cibil and Sidbi, disbursements to MSMEs rose 32% in 2021-22, led by medium, small and micro enterprises (MSME) in that order. That momentum has carried into 2022-23, with priority sector lending to micro and small enterprises rising 5% between this March and August, according to the Reserve Bank of India.
Some of India’s startups providing finance to MSMEs include LendingKart, Aye Finance, Actyv.ai, Namaste Credit, Cash Suvidha and Credit Fair.
Over the past two decades, Warburg has invested more than $5 billion in India. Its prominent investments include beauty and makeup firm Good Glamm Group and ride-hailing app Ola.
In an interview with DealStreetAsia last week, Jeffrey Perlman, managing director and head of Southeast Asia at Warburg Pincus and Chip Kaye, the firm’s CEO, said they see sizeable opportunities in Southeast Asia, as Warburg looks to replicate its success in markets such as China and India.