Blackstone Advisors acquires stake in Fino for Rs. 150 crore

Blackstone Advisors India Pvt. Ltd has bought a stake in Financial Inclusion Net- work and Operations Ltd (Fino) for `150 crore, betting that the country will persist with its drive to ensure more of the population has bank ac- counts.

Fino provides “integrated technology solutions and physical network to enable financial inclusion in India“, the company said. It has been growing at a compounded annual growth rate of almost 100% in the last few years, riding on the growth opportunities provided by the number of unbanked house- holds in India, remittances and the need for health insurance.

“India has a significantly high number of financially excluded households. For sustainable and inclusive growth, India needs to extend basic utilities like financial services to the excluded population”, said Akhil Gupta, chairman and managing director of Blackstone Advisors India. “As a dominant market leader, Fino is uniquely positioned to capitalize on this opportunity”.

The company's promoters are ICICI Bank Ltd, Corporation Bank Ltd, Hong Kong and Shanghai Banking Corp., ICI- CI Lombard General Insurance Co. Ltd, IFMR Trust, Indian Bank, Intel Corp. and Union Bank of India. Apart from ICICI Bank, the other in- vestors came on board with a total investment of `150 crore in 2007 and 2009.

Blackstone will get a 26% stake in the company, according to a person familiar with the transaction. However, the Fino management declined to make any comment about the stake involved.

This is so far the smallest in- vestment by Blackstone in In- dia. Earlier, Blackstone had in- vested `190 crore in CMS Computers Ltd in 2009.

“We will deploy this money for growth and expanding our customer base, upgrading technology and expansion, said Manish Khera, chief executive officer of Fino.

Ernst and Young was adviser to the deal, following which Blackstone will get a board seat on Fino.

Fino's product suite includes savings bank accounts, loans, recurring deposits, remittances, insurance and government disbursements. It currently has a customer base of more than 20 million.

The company acquires more than 50,000 customers a day and handles around three mil- lion transactions a month, it said in a release.

It has a network of 10,000 agents across 22 states and more than 266 districts in the country.

“Given the low penetration of banking services in the segment, there is a huge upside and growth potential for such companies,“ said Ravi Trivedy, executive director, insurance, pensions, mutual funds and financial services, at KPMG.
“Whichever company has the ability to scale up the distribution, good business model and has good governance will continue to attract private equity investments”.

Non-banking financial companies (NBFCs) and microfinance institutions (MFIs) will continue to drive growth in this segment and firms such as Fino that provide technology and processing support will see a huge opportunity, Trivedy said.

In May, Kohlberg Kravis Roberts and Co. Lp (KKR) and International Finance Corporation (IFC), the private investment arm of the World Bank, together invested `440 crore in Magma Fincorp Ltd, a Kolkata-based NBFC. KKR paid `236.31 crore for a 14.95% stake, while IFC has invested `202.4 crore for a 12.8% stake.

Fino, which is unlisted, declined to provide financial details about its business.

Deals India, published jointly by Mint, Dow Jones Newswires and The Wall Street Journal, is a one-stop destination for investment professionals following deal flow, deals news, private equity and venture-capital activity in India.

(Source-: mintlive)