Exclusive: Divya Sehgal reports that True North is in negotiations with businesses to increase its investments in the BFSI sector

 Exclusive: Divya Sehgal reports that True North is in negotiations with businesses to increase its investments in the BFSI sector

In the next years, the combined organization of AU SFB and Fincare will intensify its attention on microfinance and gold. True North will continue to concentrate on expansion while owning a part in the new company.

According to True North Partner Divya Sehgal, the domestic private equity company will keep funding banking, financial, services, and insurance (BFSI) businesses. Sehgal pointed out that the PE company is in discussions about investing with a few organizations.

"With some players in the BFSI industry, we have begun to have conversations about our investments across the asset side as well as liability side businesses," said Sehgal.

Among other BFSI enterprises, True North is an investor in FedFina, Home First Finance, and Fincare Small Finance Bank. Other investors in Fincare SFB include True North, TA Associates, Leapfrog, and Tata Capital Financial Services.

Following the Fincare-AU SFB merger, Sehgal said in an exclusive interview that the combined company's general expansion would be its primary objective.

Furthermore, Sehgal stated: "Fincare's strong portfolio in these segments will lead to the establishment of new businesses." Gold business microfinance will be new categories for AU SFB.

Could you elaborate on a few important aspects of the merger?

We want to keep onto our interest as shareholders of the combined company after the merger. Our earnings mostly follow each other, and AU SFB is greater than Fincare SFB. For instance, AU SFB made over Rs 800 crore in earnings in the first half of FY24, whereas Fincare made about Rs 200 crore. As a result, we believe the merger was ideal and that the new company would have a blended flavor.

Will you increase your ownership in the combined AU SFB?

At this time, we do not intend to increase our investment. Right now, our attention is on carrying out the merger's other conditions.

How would the promoter of Fincare SFB's Rs 700 crore investment benefit the merged company?

The amalgamated business will use the capital injection to expand on both sides of the balance sheet. It will be used to strengthen the institution and achieve development and solvency.

You own stock in Fincare SFB FedFina, HomeFirst Finance, and other BFSI firms. You just sold your majority interest in Max Bupa Insurance. What is your perspective on investing in the sector?

As you can see from our investments, we choose companies in the insurance, banking, lending, and other industries that focus more on business to consumer (B2C) relationships than business to business (B2B). A company that prioritizes its customers makes more recurring revenue. And that's how we want to establish these companies.

Furthermore, smaller ticket companies usually pique our curiosity since they have less competition. We don't want to compete with companies that are dominant in certain market categories.

Do you have any investment agreements in mind in the BFSI sector?

We are in discussions with some BFSI sector participants about our investments in both the asset side and liability side industries. Speaking about the exact firm and specifics at this time would be premature as these are continuing discussions.

With the merger process underway, what about Fincare SFB's initial public offering (IPO)?

The bank's initial public offering (IPO) will not proceed as planned. Our whole attention is on the merger, and we are awaiting the required regulatory and other clearances.

Finally, what phase of the merger will come next?

One of the main contributions Fincare makes to AU SFB is geographic dispersal. There will now be more commercial prospects for AU SFB in the Southern states.

Furthermore, as you can see, AU SFB only has a little amount of business in the microfinance and gold industries. Fincare, however, is well-established in these two industries. Here, AU SFB will have access to new markets thanks to Fincare SFB's industry knowledge.