Flipkart co-founder Sachin Bansalhas said that he will deploy all the proceeds from the sale of his stake in the e-commerce player into his financial services venture Navi Technologies, which has applied for a universal banking licence with the Reserve Bank of India (RBI). The financial services firm has sought the licence through a step-down subsidiary.
Bansal could likely invest $400-450 million in the new venture, according to estimates, which will likely make it one of the biggest equity infusions by a promoter into a new financial services venture. “I am putting almost all of mine (money) — that is going to happen in the next few days or weeks, whatever is left after Ola investment. All eggs in one basket,” said Bansal in an interview to TOI, while not commenting on exact numbers. The total amount is likely to be invested in multiple tranches.
The 38-year-old IIT-Delhi graduate, who had started Flipkart in 2007, is also adding more heft to his new venture by roping in former RBI director and ICICI Bank top executive Nachiket Mor, who was till recently head of Bill & Melinda Gates Foundation in India. He has also roped in as an adviser Paresh Sukthankar, the former deputy to HDFC Bank CEO Aditya Puri, who had worked at India’s largest private sector lender since its inception in 1994.
Bansal had agreed to sell his over 5% stake in Flipkart to US retail giant Walmart in 2018 for about $1 billion, out of which he will get $750-800 million after tax. Out of this, Bansal has invested $300-350 million in companies like ride-hailing major Ola and electric bike maker Ather. He has also put some capital in treasury operations, including debt papers of companies like Piramal Enterprises.
According to Bansal, regulators are “very open to new ideas” and the reason why he has applied for a universal licence rather than a small finance bank is that he wants to operate across multiple sectors.
“If you think like a consumer tech company rather than a traditional financial services company, you can solve some big problems,” said Bansal. He added that for India to become a $5-trillion economy, the GDP-to-credit ratio has to improve to 100% from the current 57%.
Last year, Bansal had acquired microfinance company Chaitanya Rural Intermediation Development Services (CRIDS), whose subsidiary Chaitanya India Fin Credit (CIFCPL) has applied for the banking licence. While Bansal had acquired CRIDS in his personal capacity, he is in the process of moving the investment under Navi Technologies. The last two players to get a universal banking licence in India were IDFC First Bank and Bandhan Bank, who had applied in 2013 along with 23 others and got an in-principle nod after 10-11 months in 2014.
“We will keep the smartphone at the centre of consumer experience, rather than an add-on,” Bansal said. He indicated that currently, it’s the other way round with branches being the centre of focus, and mobile apps also crash at the start of the month, underlining how there is a gap in technology capability at big players. While Chaitanya will continue to focus on the lower end of the market, Bansal also plans to launch a new product under the Navi brand, which will focus on digital lending for the middle-class.
Banking through digital channels has been growing at a record pace. According to RBI data, from September 2018 to October 2019, retail digital transactions by value saw a jump of 21% at Rs 302 lakh crore compared to around Rs 250 crore in a year-ago period. Bansal is also in the process of acquiring DHFL Insurance and Essel Mutual Fund to develop plays in the insurance and asset management plays.
Both deals are yet to receive regulatory approvals. Bansal said that Navi will raise additional capital from three-four outside investors, including World Bank arm IFC, which is investing $30 million at a valuation of $650-700 million, as TOI reported on January 10. In total, Bansal could be raising $150-200 million from outside investors, according to two sources, though Bansal declined to comment on numbers.
“We are looking for people who bring that expertise (financial services). IFC is definitely one of those names. In the 1980s, they were the first investor in HDFC, not the bank but HDFC Ltd. They were investors in almost all the banks who got a licence. So, they have tremendous experience in building banks, not just in India but outside India also. Not just banks but for insurance companies, stock markets in Africa. So, that’s a great set of capabilities we get access to,” he added.
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