Bhubaneswar-based Annapurna Finance has, by applying for the universal bank licence, set itself on the same path that Bandhan Bank took eight years ago.
Earlier this week, the Reserve Bank of India (RBI) said Annapurna Finance was the only entity that had applied for a universal bank licence in October-December through the on-tap licensing route.
If it makes the cut, the financier would become only the second microfinance institution to receive a universal bank licence after Bandhan Bank in 2015. This, after Sachin Bansal-backed Chaitanya India Fin Credit fell short in 2022.
The journey of Annapurna Finance began in 1990 as a society by the name of People’s Forum. Promoted by Gobinda Chandhra Pattnaik, the forum began operations in the Khurda district of Odisha with an aim to form self-help groups and promote socioeconomic development.
In November 2009, People’s Forum had acquired Varanasi-based Gwalior Finance and Leasing Company, and transferred its microfinance loan portfolio to the latter. People’s Forum was renamed Annapurna Microfinance Private Limited in 2010, and got its present name in January 2018. Managing director Gobinda Chandra Pattanaik and director Dibyajyoti Pattanaik are at the helm of affairs. Broadly, the company is engaged in microfinance lending to women borrowers under self-help groups, joint-liability groups, individual loans, housing loans and MSME loans.
The company’s group loans range from Rs 10,000 to Rs 1,00,000 in different cycles. The rate of interest on these loans is 23.55-23.99%. MSME loans in the range of Rs 50,000-2,50,000 attract an interest rate of 18-28%. The company offers housing finance loans in the range of Rs 1,00,000- 25,00,000 at an interest rate of 15-18%.
“It is a microfinance institution, so automatically, their clientele would be almost 100% women. Even Bandhan Bank was like that. Generally, Annapurna is doing well, it has a pan-India presence in around 18-19 states,” Jiji Mammen, executive director and chief executive officer, Sa-Dhan, said.
Annapurna Finance’s strong capitalisation, long track record of the promoters in the microfinance industry and diversified resource profile lend comfort as far as the ability of the company to repay loans is concerned, says credit rating agency CareEdge. In fact, CareEdge has reaffirmed its ‘CARE A’ rating on the company’s Rs 1,312 crore long-term facility and ‘Stable Outlook’, according to a press release dated December 28.
“The existing promoters as well as institutional investors have demonstrated support to Annapurna Finance by way of equity infusion at regular intervals. Such infusions have helped the company increase the scale of operations and market presence,” the release said.
In November 2009, People’s Forum had acquired Varanasi-based Gwalior Finance and Leasing Company, and transferred its microfinance loan portfolio to the latter. People’s Forum was renamed Annapurna Microfinance Private Limited in 2010, and got its present name in January 2018. Managing director Gobinda Chandra Pattanaik and director Dibyajyoti Pattanaik are at the helm of affairs. Broadly, the company is engaged in microfinance lending to women borrowers under self-help groups, joint-liability groups, individual loans, housing loans and MSME loans.
The company’s group loans range from Rs 10,000 to Rs 1,00,000 in different cycles. The rate of interest on these loans is 23.55-23.99%. MSME loans in the range of Rs 50,000-2,50,000 attract an interest rate of 18-28%. The company offers housing finance loans in the range of Rs 1,00,000- 25,00,000 at an interest rate of 15-18%.
“It is a microfinance institution, so automatically, their clientele would be almost 100% women. Even Bandhan Bank was like that. Generally, Annapurna is doing well, it has a pan-India presence in around 18-19 states,” Jiji Mammen, executive director and chief executive officer, Sa-Dhan, said.
Annapurna Finance’s strong capitalisation, long track record of the promoters in the microfinance industry and diversified resource profile lend comfort as far as the ability of the company to repay loans is concerned, says credit rating agency CareEdge. In fact, CareEdge has reaffirmed its ‘CARE A’ rating on the company’s Rs 1,311 long-term bank facilities, and a ‘stable’ outlook, according to a press release dated December 29.
As on March 31, Annapurna Finance received total capital infusion of Rs 992 crore in the form of equity, compulsory convertible preference shares and compulsory convertible debentures. Due to its strong capital base, the financier’s assets under management grew 37% year-on-year to Rs 6,553 crore as on March 31, aided by a rise in its off-book AUM and joint liability microfinance loans. The AUM rose to Rs 7,323 crore as on September 30. The company intends to further grow the AUM by 4%-5% by end of this fiscal.
On the flipside, CareEdge contends that the deterioration in the company’s asset quality and Odisha-centric operations are key risks. Odisha constitutes 22% of the company’s AUM as on September 30. Together, 54% of its AUM is concentrated in Odisha, Madhya Pradesh and Bihar.
The company’s strong profile will give it an edge as far as the universal bank application is concerned, considering that the RBI has generally given licences to companies with a clean track record and deep pockets.
“NBFCs have to borrow from the market, so they depend on limited lenders. When they become a bank, they are able to source deposits from the system. Then, the cost comes down and the stability of the business increases. That is what we have seen,” Sanjay Kumar Agarwal, senior director at CareEdge, said.
