Centrum Group in talks with PEs to sell 15-25% in NBFC arm

The Jaspal Bindra-controlled Centrum Group is talking to private equity funds to sell a part of the promoters' stake in the group's Rs 2,000-crore lending vertical to raise around Rs 250 crore. The main promoters of the group-the veteran banker and former chief executive of Standard Chartered Bank Asia Pacific Bindra and group founder Chandir Gidwani--are looking at diluting 15-25 percent in the credit vertical in a phased manner, depending on the valuation, says Bindra who picked up over 25 per cent stake in the group in April 2016.

"We are talking to a number of PEs and a deal should be concluded very soon. We can dilute between 15 and 25 percent step by step for Rs 150-250 crore. Maybe we will begin with SME arm and then microfinance," Bindra told PTI. The quantum of stake dilution depends on the value being offered, he said, adding, "this is the right time to do so as we are looking at more acquisitions to grow the book." It can be noted that Centurm has been driving its credit business through acquisitions. It first acquired the Rs 100-crore microfinance portfolio of South African lender FRB India in 2017, followed by L&T Finances' supply chain finance book of Rs 650 crore in September 2018. Last month took over the New Delhi-based microfinance player Altura Finance's Rs 100 crore portfolio.

And Bindra says more acquisitions will follow as and when the deal with a PE gets completed. "At least half the money raised will be used for acquisitions and the rest will be used as growth capital." Centrum entered the lending businesses in 2017 and currently provides affordable housing finance, micro finance and SME/MSME loans with an asset size of over Rs 2,000 crore. Currently, its loan book is a little over Rs 2,000 crore, of which over Rs 1,000 crore is the SME book, Rs 600 crore is home finance and the rest is microfinance and he hopes to close the year with an asset size of Rs 2,500 crore, thanks to a monthly disbursement rate of Rs 65-70 crore.

Since the past few months, with added bank lines, the company has begun scaling up operations. The business is still highly capitalised and leverage is low at only about 2 times. He also says they do not use any debt instruments to raise capital and depend solely on term loans from banks.

The group has put in over Rs 700 crore as equity into the credit business, indicating a low leverage of 2 times. Recently, promoters Bindra and Gidwani reduced their pledged shares from 82.81 percent as of March 2019 to 41.5 percent as of October 2019, giving them more leg room to raise capital if need be..