CreditAccess Grameen Ltd’s promoters’ plan to exit the Indian microlender has stalled as potential investors have baulked at the lofty valuation sought by its Dutch parent, people aware of the developments said.
Talks on the potential stake sale have been going on for the past 12–18 months, involving Netherlands-based CreditAccess India BV (CreditAccess Grameen’s promoter) and a few lenders and private equity firms, but differences in valuations may have slowed the transaction, the people said, requesting anonymity.
CreditAccess India BV, backed by a clutch of high net-worth individuals and family offices, owns 66.56 percent of CreditAccess Grameen. US-based private equity fund Olympus Capital Asia holds 15 percent of CreditAccess India BV, while the Asian Development Bank owns 9 percent.
The promoters of CreditAccess Grameen are seeking a 15–20 percent premium to the current price of the stock, which is trading at about three times the one-year forward price-to-book multiple.
However, buyer interest in microfinance institutions is lukewarm, given concerns over excessive borrower leverage and signs of the sector overheating in a few states, people cited above, including those involved in the negotiations.
With a loan book of Rs 24,647 crore as of June 30, CreditAccess Grameen is currently India’s largest standalone microfinance lender. Its net worth as of June 30 stood at Rs 6,961 crore, and at a valuation of three times the price to book, the microlender company’s promoters are said to be seeking Rs 14,000 crore for an exit from the company.
“A transaction of this size can be absorbed only by a large financial services company or a consortium of private equity investors. The business cycle for MFIs at present isn’t favourable, and hence, to buy such a large asset doesn’t make sense considering that the upside seems capped at the current valuations sought by the seller,” said a banker aware of the deal who did not want to be identified.
Large non-banks such as Bajaj Finance and Tata Capital, looking to diversify into microfinance, are said to have explored acquiring CreditAccess Grameen but talks haven’t materialized due to differences in valuations. Bajaj Finance is making inroads into the MFI business, and Tata Capital does not have a microfinance portfolio.
“When the average multiple for the microfinance sector has crashed to 1.5 – 2x on a one-year forward price to book multiple, interested buyers aren’t willing to pay an exorbitant premium to pick a stake in CreditAccess Grameen,” said a banker with knowledge of the deal.
A few private equity players, including Carlyle and Multiples, may have also shown interest in the company, but deal talks have halted due to differences in valuation expectations.
Emails sent to CreditAccess Grameen and Bajaj Finance seeking comments on the matter remained unanswered till publishing the article, while a spokesperson for Tata Capital said in a text message that the company is not looking at inorganic options for growth in the MFI business.
Spokespeople for Carlyle and Multiples didn’t immediately respond to an email seeking comments. This story will be updated once a response is received.
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