Warburg eyes 30% stake in Indian shadow bank Vistaar for $150 million - sources

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FILE PHOTO: A customer hands Indian currency notes to an attendant at a fuel station in Mumbai

By M. Sriram

MUMBAI (Reuters) - New York-based private equity firm Warburg Pincus LLC is in talks to invest around $150 million in Indian small-business lender Vistaar Finance, two sources familiar with the matter told Reuters, marking its latest bet in a booming lending market.

Warburg's discussions with Vistaar are for a 30% stake in the shadow lender, the two sources said. Deal talks are at an advanced stage and will value Vistaar at roughly $450 million, said one of the sources.

Businesses like Vistaar in India operate as non-banking financial services companies (NBFC), lending smaller amounts than traditional banks do and targeting mostly customers in towns and villages.

By March 2021, India's NBFC sector had assets worth more than 54 trillion rupees ($680 billion). Its growth in recent years has attracted investors including Sequoia Capital and KKR & Co.

Vistaar is already backed by India's Saama Capital and Westbridge Capital. It and Warburg declined to comment on Reuters queries.

India's Kotak Mahindra Capital is advising Vistaar on the talks for the private equity deal. The investment bank did not respond to a request for comment.

"NBFCs are one of the biggest sectors for PE funds and have a proven track record of performance," the first source added, explaining the rationale of Warburg's interest.

Founded in 2010, Vistaar provides small business loans to shops, mills, hotels and manufacturers. It operates 196 branches in 12 Indian states and has lent more than $300 million so far, according to its website.

It says it typically extends business loans of $1,200 to $60,000 for five to 10 years.

The first source also said that, apart from fresh shares being issued by Vistaar, Warburg may acquire shares held existing investors, though it was not yet clear which of them might exit.

For the fiscal year to March 2022, Vistaar recorded a net profit of $9.3 million, 14.5% more than a year before, according to credit rating firm ICRA. Its total income stood at $54 million in the period.

Reuters reported last year that Warburg was in talks to raise $16 billion from investors for its latest flagship global private equity fund, its biggest ever.

Over the past two decades, Warburg has invested more than $5 billion in India.

Its recent investments have included startups and consumer brands such as earphones-maker boAt, beauty and makeup firm Good Glamm Group and ride-hailing app Ola. Warburg's NBFC bets in India include education-sector lender Avanse Financial Services and Fusion Microfinance.

(Reporting by M. Sriram; Editing by Aditya Kalra and Bradley Perrett)