Ananya Birla’s Svatantra To Acquire Sachin Bansal’s Chaitanya For INR 1,429 Cr

Ananya Birla-led Svatantra Microfin Pvt Ltd on Tuesday (August 8) said it has signed a definitive agreement to acquire Sachin Bansal-backed fintech startup Navi’s subsidiary Chaitanya India Fin Credit Pvt Ltd for INR 1,479 Cr. 

In a statement, Navi chairman and chief executive officer (CEO) Sachin Bansal said the deal is part of the company’s strategic plan to focus on digital-first businesses. 

“We are pleased to announce the proposed sale of Chaitanya to Svatantra… We have seen Chaitanya grow almost 6X in the last 4 years, making credit accessible to rural India. This transaction is in line with our strategic plan to focus on our digital-first businesses, as we continue our digital-first financial services through the Navi Group,” added Bansal. 

On the other hand, Svantantra will leverage synergies, in terms of technology, with Chaitanya to further expand its user base and operations.

The acquisition of Chaitanya India will help Svantantra become the second largest non-banking finance company (NBFC)-microfinance institution (MFI) in the country with a combined asset under management of INR 12,409 Cr, the statement said. In addition, the deal will enable the Birla-scion led micro-finance company to expand its reach to more than 3.6 Mn ‘active’ customers through 1,517 branches across 20 states.

The deal is expected to be completed by 2023-end. 

Commenting on the development, Svatantra founder and chairperson Birla said, “The proposed acquisition will propel Svatantra to a significant leadership position. The combined entity will command a substantial reach, enabling the delivery of a diverse array of financial services to our clients across a geographically diverse portfolio.”

Navi Up Against The Wall

Bansal, cofounder of Flipkart, acquired Chaitanya Rural Intermediation Development Services (CRIDS) via BAC Acquisitions (now Navi Technologies) in 2019 in one of his biggest deals since quitting the ecommerce startup. 

CRIDS was later rebranded as Chaitanya India Fin Credit, and the acquisition helped Navi acquire an NBFC licence. While the NBFC has seen a manifold increase in assets under management (AUM), Chaitanya continues to be bogged down by a slew of issues.

Chaitanya’s capital adequacy ratio (CAR) has been a potential headache for the Navi Group, declining continuously between FY19 and FY22. Chaitanya’s CAR stood at 17.38% at the end of FY22, against the minimum threshold of 15% set by the Reserve Bank of India (RBI). 

Making matters worse was the RBI, last year, rejecting Chaitanya India’s application for an ‘on tap’ universal banking licence. As per existing mandates, the company cannot apply for a licence for at least the next three years (till 2025). Any plans that hinged on the Navi subsidiary acquiring a banking licence were thrusted into uncharted waters. 

The central bank had reportedly flagged issues such as ‘lax internal governance’ guardrails and conflict of interest due to its parent company Navi owning a general insurance company for rejecting the application. 

Overall, Chaitanya was a profitable venture, reporting a profit after tax of INR 52.25 Cr in FY22, more than double compared to INR 20.6 Cr in the previous fiscal year. Its revenue from operations grew more than 55% to INR 361.1 Cr in FY22 from INR 233.7 Cr in FY21. 

Back at the parent entity, Navi Group continues to be saddled with losses. It reported a loss of INR 362 Cr in FY22 as against a profit of INR 71 Cr in FY21. Making matters worse has been funding winter which has led to a capital drought across the startup ecosystem and Navi has been no exception. 

With no clarity so far on its INR 4,020 Cr IPO, Navi has had to cut corners. It fired more than 200 employees across multiple verticals in July this year to conserve cash and extend the runway.