Banks paid premium of ₹119 per share for majority stake in CapitaWorld

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Banks paid premium of ₹119 per share for majority stake in CapitaWorld

Mumbai: A clutch of state-run banks and their subsidiaries paid a premium of ₹119 per share in July to jointly buy a majority stake in Ahmedabad-based CapitaWorld Platform Pvt. Ltd, regulatory filings showed. The company processes applications for the 59-minute loan scheme that Prime Minister Narendra Modi announced on 2 November.

Banks paid premium of ₹119 per share for majority stake in CapitaWorld

Founded in March 2015, CapitaWorld is an online fund-raising platform that brings together businesses, individuals, banks, NBFCs and investment bankers using analytics. The company acts as an intermediary between the loan seeker and banks. Using data analytics and artificial intelligence, it links potential borrowers to lenders.

CapitaWorld, with shares at a face value of ₹10, had undertaken two sets of valuations—one in 2017 and the other in 2018. While the 2017 valuation report by OMMS & Associates valued it at ₹100 a share, the same chartered accountant firm valued it 29% higher at ₹129.39 in 2018. During the same period, the company’s losses rose from ₹2.5 lakh to ₹1.69 crore (provisional). The lenders and their arms shelled out ₹83 lakh-₹8.3 crore each for the stake purchase.

CapitaWorld came into focus after Modi announced a series of measures designed to help small businesses by giving them access to quick finance and sparing them the rigours of complying with some labour laws. The ‘micro, small and medium enterprises (MSME) support and outreach’ programme launched by Modi is meant to grant quick access to credit at attractive terms. Loan requests for up to ₹1 crore will be approved online in principle in less than an hour—59 minutes to be precise.

Modi had also said that banks will process loans under the new scheme by analysing the information provided by the applicant in their GST and income tax returns in addition to the cash flow-related information available with banks.

Registrar of Companies documents reviewed by Mint showed that these shares were sold by the company on a private placement basis in July. The documents also showed that the company increased its authorized share capital on 23 April from ₹1.5 crore to ₹3.25 crore; its paid-up capital stood at ₹3.22 crore. The purpose of this private placement, CapitaWorld Platform said, was to “raise funds for the company’s growth/expansion plan requirements”.

Apart from public sector lenders like the State Bank of India (9% stake), Small Industries Development Bank of India (8.03%), SIDBI Trustee Co. Ltd A/c Samridhi Fund (11.97%), Bank of Baroda (9%), Vijaya Bank (2%), Indian Bank (2%) and Punjab National Bank (5%), SBI Cards and Payment Services Pvt. Ltd and BoB Capital Markets Ltd purchased 3.5% each. This puts their total stake at 54%.

However, Sidbi tweeted on 8 November that a consortium of six public banks led by Sidbi held 56% in CapitaWorld, which gave it a public sector character.

In response to Mint’s queries, a Sidbi spokesperson, on behalf of the public sector lenders, said in an email that after evaluating a pool of fintech companies, CapitaWorld was identified as a vehicle to take forward the contactless initiative and once the technology platform was ready and tested, the investors evaluated it and found it to have a sustainable model.

“The entire investment process was led by arm of Sidbi, specialized in equity investments. In line with industry practices, while carrying out the appraisal, legal due diligence and valuation of the entity was got done through an independent firm,” the spokesperson said.

A CapitaWorld spokesperson did not respond to an email seeking comment.

An undated document from the registrar of companies (RoC) showed that shareholders in the company include CapitaWorld Global Pvt. Ltd, Kunte Modha Shah Advisors LLP, JVKM Associates LLP, Aviruk Chakraborty, Black Swan Venture Capital Pvt Ltd, Joy Holding Pvt Ltd and Mobile Search Engine Pvt Ltd, among others.

After the issue of 1.74 million shares to these new shareholders, the promoter shareholding in the company fell from 67.4% to 31%, documents showed.

According to RoC, directors in CapitaWorld Platform include Vikas Manilal Shah, Sandeep Diddi, Jinand Vikasbhai Shah and others. As on 31 March 2016, Vinod D. Modha held 29.34% shares, Vinod D. Modha (Hindu Undivided Family) owned 4%, Jinand Shah 33.33% and Aviruk Chakraborty held 33.33%.

Between 11 November 2016 and 8 December 2016, the firm saw a slew of shares being transferred between entities. On 28 November 2016, Jinand V. Shah, the managing director, transferred shares to JVKM Associates LLP, Joy Holdings Pvt. Ltd, Mobile Search Engine Pvt. Ltd, Black Swan Venture Capital Pvt. Ltd and CapitaWorld Global Pvt Ltd (the holding company of CapitaWorld Platform).

source: livemint