by M. Sriram
MUMBAI (Reuters) – New York-based private equity firm Warburg Pincus is in talks to invest about $150 million in small Indian lender Vestar Finance, two sources familiar with the matter told Reuters, in its latest bet in a booming lending market. .
The two sources said Warburg’s discussions with Vestaar related to a 30 percent stake in the shadow bank. One of the sources said deal talks are at an advanced stage and would value Vistaar at around $450 million.
Companies like Vistaar in India operate as non-bank financial services firms (NBFC), lending less than traditional banks and targeting mostly customers in towns and villages.
By March 2021, India’s NBFC sector had assets of over 54 trillion rupees ($680 billion). Its growth in recent years has attracted investors including Sequoia Capital and KKR & Co (NYSE:).
Vistaar is already backed by India’s Saama Capital and Westbridge Capital. She and Warburg declined to comment on Reuters inquiries.
India’s Kotak Mahindra Capital is advising Vistaar on talks of a private equity deal. The investment bank did not respond to a request for comment.
“Non-bank financial firms are one of the largest sectors for private equity funds and have a proven track record of performance,” added the first source, explaining the rationale behind Warburg’s interest.
Founded in 2010, Vistar provides small business loans to shops, mills, hotels and manufacturers. It operates 196 branches in 12 Indian states and has loaned more than $300 million so far, according to its website.
It says it typically extends business loans from $1,200 to $60,000 for five to 10 years.
The first source also said that apart from new shares issued by Vistaar, Warburg may acquire shares held by existing investors, although it is not yet clear which of them might come out.
For the fiscal year ending in March 2022, Vistaar posted a net profit of $9.3 million, up 14.5% from the previous year, according to credit rating firm ICRA. Its total income was $54 million in that period.
Reuters reported last year that Warburg was in talks to raise $16 billion from investors for its latest global private equity fund, its largest ever.
Over the past two decades, Warburg has invested more than $5 billion in India.
Its recent investments have included start-ups and consumer brands such as earphone maker BoAt, beauty and makeup company Good Glamm Group, and app Ola. Warburg’s NBFC bets in India include education sector lender Avanse Financial Services and Fusion Microfinance.