Information on the Target

Bangalore-based mid-market private equity fund Amicus Capital has committed up to INR 43 crores in Capital Small Finance Bank ("Capital SFB" or "the Bank"), which is based in Punjab. Existing investor Pi Ventures also participated in this funding round, contributing to a strong capital base. The Bank has notable investors such as HDFC Life, ICICI Prudential Life, and the Small Industries Development Bank of India (SIDBI). Founded in 2000 by Mr. Sarvjit Singh Samra as a Local Area Bank, Capital SFB has since grown to be one of the leading banks in Punjab and neighboring regions.

Industry Overview in India

Capital SFB was one of ten entities among 72 applicants granted 'In-Principle' approval by the Reserve Bank of India to set up a Small Finance Bank on September 16, 2015. Notably, it was among just two non-microfinance institutions to receive this approval. Capital SFB commenced operations as India's first Small Finance Bank on April 24, 2016, transitioning from its earlier identity as a Local Area Bank, which was operational since January 14, 2000.

The Small Finance Bank sector in India has shown robust growth, driven by the increasing need for financial inclusion. With a focus on serving unbanked and underbanked populations, Small Finance Banks are strategically positioned to cater to the needs of micro, small, and medium enterprises (MSMEs), agriculture, and retail customers.

Capital SFB leads in this emerging market segment, providing diverse banking services, including agriculture loans, MSME loans, personal loans, auto loans, and mortgage loans. As evidenced by its expanding network and diversified loan portfolio, the Bank is set to play an instrumental role in promoting economic development, especially in rural and semi-urban areas.

In recent years, financial institutions, especially those focusing on small finance, have had to navigate a complex economic environment characterized by increased competition and evolving regulatory requirements. However, the sector's sound fundamentals and growth potential remain attractive to investors looking to capitalize on India's financial inclusion goals.

The Rationale Behind the Deal

The current fundraising round aims to bolster Capital SFB's branch expansion plans, particularly into Delhi, Haryana, and Rajasthan, while also enhancing its presence in Punjab. The funds will allow the Bank to strengthen its position and support its growth targets without compromising its capitalization.

Capital SFB's management, led by Mr. Samra, has expressed confidence that this investment will facilitate a deeper market penetration and rapid expansion, making the bank's services more accessible to a broader customer base, especially in the MSME sector.

Information about the Investor

Amicus Capital is an India-focused mid-market growth capital fund established by seasoned private equity professionals Sunil Theckath Vasudevan and Mahesh Parasuraman. Currently, the fund invests from its inaugural fund of US$ 88 million (INR 620 crores). Amicus Capital has a strategic focus on sectors such as financial services, consumer products, healthcare, and technology, allowing it to leverage extensive expertise and networks.

The fund seeks to invest between US$ 8-20 million in high-growth businesses poised for scaling, while typically maintaining a minority stake. With the investment in Capital SFB, Amicus Capital aims to support the Bank in establishing itself as a market leader as it expands its footprint in Punjab and neighboring states.

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The investment in Capital SFB represents a promising opportunity for Amicus Capital, considering the Bank's established market position and potential for further growth. With a proven track record and a solid management team, the fundamentals of Capital SFB, including strong asset quality and a loyal deposit base, provide a solid foundation for future profitability.

Amicus Capital's involvement is particularly apt given its focus on financial services, underscored by its intent to facilitate the Bank's expansion strategy. This is crucial in an evolving sector where access to capital and operational scalability dictate success.

Moreover, the specific focus on the MSME sector aligns with broader economic goals in India, particularly in driving growth in underserved markets. By enhancing its geographical reach and service offerings, Capital SFB is poised to capitalize on the increasing demand for banking services.

In conclusion, this deal seems to be a strategic investment that leverages Amicus Capital's expertise to support the growth trajectory of Capital SFB while contributing to financial inclusion efforts across the region.

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