Sources say that Warburg wants to buy a 30% stake in the Indian shadow bank Vistar for $150 million.
Mumbai Two sources close to the situation told Reuters that New York-based private equity firm Warburg Pincus LLC is in talks to invest around $150 million in Indian small-business lender Vistaar Finance. This would be its latest bet in a booming lending market.
Two sources said that Warburg is in talks with Vistaar about getting a 30% stake in the shadow lender. One of the sources said that deal talks are far along and that Vistaar will be worth about $450 million.
In India, businesses like Vistaar are called non-banking financial services companies (NBFC). NBFCs are different from banks because they don’t lend as much money and mostly work with people in towns and villages.
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By March 2021, the assets of India’s NBFC sector would be worth more than 680 billion dollars, or 54 trillion rupees. In recent years, its growth has drawn investors like Sequoia Capital and KKR & Co. (NYSE:KKR).
Saama Capital and Westbridge Capital, both of which are based in India, already back Vistaar. Both it and Warburg did not answer Reuters’ questions.
Kotak Mahindra Capital, which is based in India, is helping Vistaar with the private equity deal talks. When asked for a comment, the investment bank didn’t give one.
The first source added that Warburg was interested because “NBFCs are one of the biggest sectors for PE funds and have a proven track record of performance.”
Vistaar started in 2010 and helps shops, mills, hotels, and manufacturers get small business loans. It has 196 branches in 12 Indian states, and its website says that it has given out more than $300 million in loans so far.
It says that most business loans range from $1,200 to $60,000 and are given for five to ten years.
The first source also said that, in addition to issuing new shares, Vistaar might also buy shares from existing investors, though it wasn’t clear yet who might leave.
ICRA, a credit rating company, says that Vistaar made a net profit of $9.3 million in the fiscal year that ended in March 2022. This was 14.5% more than the year before. During that time, it made a total of $54 million.
Last year, Reuters said that Warburg was in talks with investors to get $16 billion for its latest flagship global private equity fund, which would be its largest ever.
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Warburg has put more than $5 billion into India over the past 20 years.
It has recently put money into startups and consumer brands like BoAt, a company that makes headphones; Good Glamm Group, which sells beauty products; and Ola, an app that lets people call for rides. Avanse Financial Services and Fusion Microfinance are two NBFCs that Warburg is betting on in India.
