Private equity (PE) fund Kedaara Capital is in advanced discussions to acquire a stake in small business lender Veritas Finance at a valuation of ₹2,000 crore, two people aware of the talks said.
Kedaara plans to put in about ₹500 crore, along with existing investors such as Norwest Venture Partners and CDC Group, the UK government’s development finance institution, the people cited above said on condition of anonymity.
Veritas lends to micro, small and medium enterprises (MSMEs), and currently has a loan book of over ₹1,200 crore with 199 branches and over 45,000 customers, according to its website.
Veritas managing director and CEO D. Arulmany and Kedaara’s managing partner Manish Kejriwal did not respond to emails seeking comment.
Before starting Veritas in 2015, Arulmany was the president and CEO of Aptus Value Housing Finance, which is currently valued at over ₹5,000 crore and has investors including Sequoia, Steadview and Westbridge Capital.
Arulmany was also an early employee at the Cholamandalam Group, one of India’s oldest financial services conglomerates during 1996-2008, ending his stint there as the business head of Chola DBS, which started out as an equal joint venture between the Murugappa Group and Singapore’s DBS Bank.
“A lot of investors are betting on the founder’s quality and experience in the lending space. It is very valuable to have an experienced hand running a new-age lending firm at a time when the sector hasn’t done too well,” said an investor in the space, requesting anonymity.
Venture capital firm A91 Partners invested $20 million in Aye Finance via a secondary share purchase, Mint reported on 16 January, 2020.
The lending firms successfully raising equity currently are the ones that have managed to keep their default rates low at a time when the country has seen its worst-ever credit crisis, triggered by multiple defaults by firms such as Infrastructure Leasing and Financial Services, Altico Capital and Dewan Housing Finance Ltd, among others.
Indifi, which provides loans to small businesses in travel, e-commerce and retail, raised ₹145 crore led by the CDC Group in August, while Lendingkart, which offers collateral-free working capital and other business loans to small businesses raised ₹212 crore from its existing investors including Fullerton Financial Holdings and Bertelsmann India Investments around the same time.
