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Oman India II picks up stake in Indian Small Finance Bank

Oman India Joint Investment Fund II, a private equity fund backed by the State General Reserve Fund (SGRF) — the largest sovereign wealth fund of the Sultanate of Oman, as well as the State Bank of India (SBI) — the largest public sector banking and financial enterprise in India — has acquired a 9.9 per cent stake in a Small Finance Bank based in the north-western state of Punjab. The stake is valued at Rs 84 crore (approximately RO 4.5 million).

It is the latest in a string of investments made from OIJIF’s second fund in favour of well-established mid-market Indian-based firms. Previous transactions have benefited Divgi TorqTransfer, a leading manufacturer of automotive drivetrain systems based in Pune; Stanley Lifestyles — manufacturer of home furniture products; Annapurna Finance — a well-known provider of microfinance; and PNB MetLife — a life insurance company.

Jalandhar-based Capital Small Finance Bank, which sold a minority stake to OIJIF II in the latest transaction, is credited with pioneering the introduction of modern banking facilities to rural areas of the Punjab at low cost.
This has enabled farmers and low-income sections of the local community to access credit at affordable interest rates, thus ending the stranglehold of traditional moneylenders operating in these parts.

Commencing operations in 2000, Capital FSB began life as a Local Area Bank and eventually evolved to become India’s largest local area bank. In 2016, it was converted into a Small Finance Bank — the country’s first — and has since made sizeable inroads into neighbouring states. It currently operates a network of more than 150 branches, overseeing a diversified loan book comprising agricultural, MSME, mortgage, personal and auto loans, with a strong focus on the agriculture and MSME sectors.

Other investors in Capital Small Finance Bank include Amicus Capital Private Equity, Amicus Capital Partners India Fund and Pi Ventures, all India-based firms that participated in the latest investment round. Previous investors include HDFC Life, ICICI Prudential Life and Small Industries Development Bank of India (Sidbi).

Commenting on the latest stake purchase, Srinath S, CEO — Oman India Joint Investment Fund II, said: “Capital SFB has all the right ingredients required to be successful in the Indian banking space. We were particularly delighted to see such consistent track record of sustainable growth and profitability over two decades. We are excited to be part of Capital SFB as it now embarks on the journey of growth and expansion.”

OIFJI II, representing the second fund of Oman India Joint Investment Fund, was set up with a target corpus of $300 million.

“Fund II seeks to follow an investment strategy similar to Fund I whereby it seeks to achieve long-term capital appreciation and to generate reasonable risk adjusted returns. Its strategy is to follow a bottom-up, opportunistic, flexible approach to investing.

Fund II will achieve sector diversification by investing across various sectors though will not invest in real estate,” OIJIF explained on its website.
  • Oman India Joint Investment Fund II
  • State General Reserve Fund
  • State Bank of India
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