Clix Capital, Suryoday SFB in merger talks; deal in advanced stage

Clix Capital Services, a digital-lending shadow bank, is in merger talks with Suryoday Small Finance Bank (SSFB), a listed entity. The non-banking financial company (NBFC) is run by former GE Capital boss Pramod Bhasin and former D E Shaw & Co managing director (MD) Anil Chawla. According to sources, “the due diligence is already on for the proposed merger, which is in a fairly advanced stage. The deal is expected to be closed soon”. Centrum Capital is said to be the matchmaker. It was pointed out that the merger talks between Clix Capital and SSFB are an indication of .....
Clix Capital Services, a digital-lending shadow bank, is in merger talks with Suryoday Small Finance Bank (SSFB), a listed entity. The non-banking financial company (NBFC) is run by former GE Capital boss Pramod Bhasin and former D E Shaw & Co managing director (MD) Anil Chawla.

According to sources, “the due diligence is already on for the proposed merger, which is in a fairly advanced stage. The deal is expected to be closed soon”. Centrum Capital is said to be the matchmaker.

It was pointed out that the merger talks between Clix Capital and SSFB are an indication of the fact that the second rung of NBFCs will find the going tough, with bank funding lines getting choked.

The merger talks with Clix Capital also fits in with the strategy articulated by SSFB’s MD and chief executive officer (CEO) Baskar Babu Ramachandran. In a note to shareholders in the annual report for 2020-21 (FY21), he said the bank is investing heavily to bring in more analytics platforms and tools to deep-dive into the nuances of customer behaviour, digital engagement, and banking habits, and prepare a more accurate forecasting model.

“The game-changer for us this year will be to deliver digital financial services, with best-in-class customer experience to reduce the cost of operations and yet reach the last mile,” said Ramachandran.

In an interview to Business Standard last year, he had also said “the bank may apply for a universal banking licence”.

Clix Capital is focused on retail, consumer, and small business, with assets under management of over Rs 3,027 crore. This is the second attempt by the NBFC to merge with a listed bank, after its abortive attempt to acquire the financially strapped Laksmi Vilas Bank (LVB) in October last year. Clix Capital eventually lost out in the race to Singapore-based DBS Bank.

According to sources, over 85 per cent of the equity of Clix Capital is held by a fund controlled by AION Capital Partners, which was a joint venture between ICICI Venture and Apollo Management, but this was called off in June last year. However, the two companies have agreed to jointly manage the AION Fund which had raised $850 million. One of the investments was in Clix. Bhasin and Chawla, according to sources, hold most of the remaining equity. The company was set up in 2016 after a consortium, led by AION, bought out the financial services business of GE in India.  

Bhasin, chairman of Clix Capital, when contacted declined to comment till the time of going to press.

A spokesperson for SSFB said: “We do not comment on market speculation and it would be inappropriate on our part to do so. As a growing organisation built on strong fundamentals and high standards of corporate governance, we evaluate opportunities on an ongoing basis, which create long-term shareholder value. We will make necessary disclosures as and when required.”

The bank has a current market capitalisation of Rs 1,590 crore. Its share price fell to Rs 149.5 at the close of trade on September 9, from Rs 187.45 a month ago.  

Clix had earlier made a non-binding offer to buy up to 85 per cent stake in LVB. But negotiations, said sources, got extended and there were numerous delays. Matters took a new turn when shareholders ousted seven directors on the board. These included the MD and CEO. This led to the Reserve Bank of India (RBI) approving the setting up of a three-member committee of directors to run the daily affairs of the bank and find a buyer. The RBI cleared the proposal by DBS Bank’s local arm — which is also locally incorporated — to buy the failed bank.

According to an ICRA report of July, Clix Capital Services’ standalone gross non-performing assets (NPAs) in FY21 was 3.6 per cent, compared to 1.1 per cent in 2019-20. During the same period, net NPAs stood at 1.5 per cent, compared to 0.5 per cent. Profit after tax fell to Rs 4 crore, from Rs 20.8 crore.

SSFB reported a net loss of Rs 48 crore for the quarter ended June. This was due to a write-off on an account, provisioning, as well as impacted earnings, due to disbursements because of the second wave of Covid–19. It had posted a net profit of Rs 27 crore a year ago.

As of March, the bank’s gross NPAs was Rs  393.68 crore; net NPAs Rs 188.12 crore.

What has also caught the eye of a few large investors in SSFB is Resolution 9 in its notice to shareholders for its 13th annual general meeting. It refers to the financing arrangement entered into by Ramachandran, key promoter and MD and CEO with Placid, a non-deposit taking, systemically-important NBFC registered with the RBI, before listing of equity shares of the bank for a secured structured finance facility aggregating to Rs 565.2 million to enable the key promoter to subscribe to equity shares of the bank prior to its initial public offering. It spells out the terms of equity upside to be distributed. That (i) in the event the settlement price is up to Rs 500, the equity upside shall be distributed between the financier and the promoter in the ratio of 1:1; and (ii) in the event the settlement price exceeds Rs 500, the equity upside shall be distributed between the financier and the promoter in the ratio of 3:2.
SHAKING HANDS
  • Deal an indicator that second-rung shadow banks are finding it tough to get bank funding lines
  • Clix Capital is focused on retail, consumer, and small business, with assets under management of over Rs 3,027 crore
  • Second attempt by the NBFC to merge with a listed bank, after its abortive attempt to acquire Lakshmi Vilas Bank last year
  • Centrum Capital is matchmaker


Dear Reader,


Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.

We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor

Business Standard is now on Telegram.
For insightful reports and views on business, markets, politics and other issues, subscribe to our official Telegram channel
Key stories on business-standard.com are available to premium subscribers only.

Already a premium subscriber?

Subscribe to get an across device (Website, Mobile Web, Iphone, Ipad, and Android Phone applications) access to Premium content, Breaking News alerts, Industry Newsletters, Stock and Corporate news alerts, access to Archives and a lot more.

Read More on

CLIX CAPITAL

SURYODAY SMALL FINANCE BANK

CENTRUM CAPITAL

MERGER

COMPANIES

NEWS


Most Read

Markets

Companies

Opinion

Latest News

Todays Paper

News you can use