Adani Capital acquires MSME lending business from Essel Finance

Adani Capital Pvt. Ltd, the non-bank financial company (NBFC) arm of the Adani Group focused on small and micro entrepreneurs, has acquired the micro, small and medium-sized enterprise (MSME) lending business of Essel Finance.

Through this acquisition, Adani Capital secured a loan portfolio of approximately 145 crore, operating from 10 cities, comprising approximately 1,100 customers and 40 employees.

It is the second asset of the indebted Subash Chandra Group that Adani has acquired. In August 2019, Essel Group announced plans to sell 205 megawatts (MW) of its operational solar power assets to Adani Green Energy Ltd at an enterprise value of 1,300 crore.

“The acquisition complements our existing MSME business and helps us expand into new geographies including Noida and Chennai,” said Gaurav Gupta, Managing Director of Adani Finserve Pvt. Ltd, the holding company for Adani’s financial services business.

“We operate in similar segments, namely secured lending focused on income-generating borrowers. It was an opportunistic acquisition for us; over the next 6-12 months, we will focus more on improvising processes, leveraging technology and improving productivity,” he added.

Adani Finserve is engaged in the lending business through two companies, Adani Capital and Adani Housing Finance. The housing finance arm is only engaged in affordable home loans and does not lend to home builders for the construction of projects.

Adani Capital lends to micro and small entrepreneurs in four vertical sectors: agricultural loans, mainly for tractors, commercial vehicle loans for new and used vehicles, loans to MSMEs and for the supply chain.

“We want to be the most economical and convenient lender to this unbanked segment, which either doesn’t get formal financing or gets financing at very unreasonable interest rates,” Gupta said.

According to Gupta, collectively, the NBFC and the housing finance companies had a loan portfolio of 1,100 crore as in December, the latter contributing 150 crore. The lender claims to have more than 18,000 customers across its two businesses. Gross NPAs as of December 31 amounted to only 2.4 crore, he said.

The lender, which operates mainly in western India, aims to gradually expand its geographical presence in central and eastern India.

“We will be looking to expand the business to the eastern states. We assess Madhya Pradesh, Chhattisgarh and Orissa. You might see us entering those states around the middle of the next fiscal year,” Gupta said.

Adani Capital operates in Gujarat, Maharashtra, Rajasthan and Karnataka with 56 branches, while Adani Housing Finance operates in Gujarat, Maharashtra and Rajasthan with 27 branches.

Through geographic expansion and organic growth, Gupta expects the business to reach 2,700 to 3,000 crores by the end of next fiscal year.

So far, the group led by Gautam Adani has invested 450 crores in the financial services branch.

While the lender has seen strong growth in its business, Gupta said the current difficult macroeconomic environment is manifesting in slower growth in big-ticket purchases such as housing.

“It’s a function of two things – one is that we ourselves are cautious and as a result we’ve tightened our underwriting process. And generally consumer sentiment is a bit weak and that plays a role in big ticket items,” Gupta said.

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