ESAF Microfinance to raise Rs 650 crore before small finance bank launch


KOLKATA: ESAF Microfinance, which will be kicking off its small finance bank journey in a fortnight, is looking to ramp up capital ahead of the transition.

The Thrissur-based company is in talks with investors such as insurance companies and mutual funds to raise Rs 500 crore in non-convertible debentures, along with another Rs 150 crore in commercial papers.

ESAF Chairman K Paul Thomas said the company expects to close the issues by the end of this week. The lender has already mobilized Rs 180 crore in commercial papers last week.

“If we can ramp up capital before the conversion, we can focus on scale and retail liability franchise development in small finance bank from the beginning,” Thomas told .

ESAF will officially launch small finance bank operation on March 17 after a week’s of trail run starting from March 10.

The lender from Kerala, a state on India’s Malabar Coast with a vast non-residents population sending remittances and dollar deposits in local banks, plans to offer “a little higher” interest rates compared to mainstream banks to attract depositors.

Chennai-based Equitas Small Finance Bank offers 6% on savings deposits while Suryoday Small Finance Bank, which operates in Maharashtra, offers 6.25% on savings deposits up to Rs 1 lakh.

Thomas said ESAF would start as a full service bank with 15 branches and digital facilities such as internet banking and mobile banking. It would like to have 85 branches by September.

“We will also start lending to agriculture, housing and MSME sectors,” Thomas said. The lender has an outstanding micro-loan portfolio of Rs 2500 crore. It lends at 22.9% a year.

Reserve Bank of India offered preliminary licences to 10 entities and the list includes Janalakshmi Financial Services, Disha Microfin, RGVN Microfinance (North East) and Au Financiers (India).

ESAF is the sixth to commence small finance bank after Capital Small Finance Bank, Equitas, Utkarsh, Suryoday and Ujjivan.

It is promoted by ESAF Swasraya Multi State Cooperative Agro Society with 50.34% stake and has Rs 360 crore networth. Dia Vikas Capital, a subsidiary of Opportunity International Australia, holds 19.97% with Small Industries Development Bank of India’s 12.86% interest