Multiples PE and Kedaara Capital-backed non-bank lender Veritas Finance Ltd has delayed its Rs 2,800-crore initial public offering (IPO) over concerns about the impact of US tariffs on India’s exports-focused MSMEs, sources told Moneycontrol.
An increased 50 percent tariff on Indian exports to the US, which includes a 25 percent “penalty” for buying Russian oil, came into effect at 9.31 am on August 27. The Russia levy is on top of the 25 percent so-called reciprocal tariff that kicked in earlier this month.
Sources said the non-banking finance company was planning to launch its share sale in August.
However, US President Donald Trump’s additional 25 percent penalty appear to have forced the company to halt the plan.
“The 50 percent tariff on Indian exports has soured the sentiment for MSMEs as a large number of them are exposed to exports, especially in sectors which are the hardest hit by US tariffs such as textiles, gems and jewellery, auto components, chemicals and sea food,” one of the sources cited above said.
The textiles, gems and jewellery and seafood industries, which account for approximately 25 percent of India’s exports to the US, are likely to be the most affected, rating agency CRISIL said in an August 20 report.
MSMEs have more than 70 percent share in these sectors and will be hit hard.
“Another sector likely to face the heat is chemicals, where MSMEs have a 40 percent share,” the report added.
An email sent to Veritas Finance did not elicit a response.
Veritas Finance provides working capital loans to MSMEs in urban and semi-urban areas as well as other loan products such as affordable housing loans, used commercial vehicle loans and small business loans in rural areas, focusing on customers employed in the MSME space.
Also Read: 50% tariff kicks in: Impact on GDP, exports and how India plans to tackle it. Key points
Veritas planned to raise around Rs 2,800 crore through its IPO, including Rs 600 crore of primary capital and the rest being an offer for sale by investors of the NBFC.
The lender, however, is hopeful that sentiment will turn favourable in the second half of the fiscal for it to reconsider the IPO launch, a second source said. Veritas received SEBI's go-ahead for its IPO in April, which is valid for a period of 12 months.
While the roadshows witnessed significant interest and encouraging institutional demand, considering that an IPO is a significant milestone in the journey of the company, a vibrant market conditions would augur well for launch, sources said.
Currently, the market seem to have certain unease about the outlook for NBFCs catering to the MSME segment. “The company is waiting for conducive market conditions to launch the IPO and expects the H2 could provide such a positive environment for financial services and more particularly for MSME segment,” the source said. The company would consult directors and investors to decide the appropriate time to launch the IPO, they added.
Veritas Finance’s loan book stood at Rs 6,517 crore as of September 30, 2024. In FY 24 the lender's loan book grew by 62 percent to Rs 5,723 crore from Rs 3,533 crore in the previous fiscal.
The NBFC has 424 branches across 10 states and one union territory. It derives over 88 percent of its loan book from Tamil Nadu, Andhra Pradesh, Telangana, Karnataka and West Bengal, which contributed Rs 5,772.6 crore as of September 30, 2024.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
