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Key takeaways from Navi’s DRHP to raise Rs 3,350 crore

Sachin Bansal led financial services company Navi Technologies filed the Draft Red Herring Prospectus to raise Rs 3,350 crore from the public markets with SEBI today.

The company, which started out as a lending business in 2018 and has a presence in insurance, asset management, and microfinance, will issue fresh equity shares as part of its IPO. The company will invest Rs 2,370 crore of the proceeds into its lending business, Navi Finserv Private Limited (NFPL) and Rs 1,500 crore in its insurance subsidiary, Navi General Insurance Limited (NGIL), it said in the DRHP.

YS first reported the developments on March 7.

Navi has appointed ICICI Securities, BofA Securities, Axis Capital, Credit Suisse Securities (India), and Edelweiss Financial Services as the book running lead managers for the public issue.

Here are a few key takeaways from Navi’s DRHP:

  • In its DRHP, Navi Technologies has said that it might allocate up to 60 percent of the portion for Qualified Institutional Buyers (QIB) to Anchor Investors based on consultation with its book managers. One-third of the Anchor Investor portion will be reserved for domestic mutual funds.
  • Navi Technologies currently has 10 subsidiaries including Anmol Como Broking, BACQ Acquisitions, Chaitanya India Fin Credit (CIFCPL), MavenHive Technologies, Navi AMC, NFPL, NGIL, Navi Investment Advisors, Navi Securities, and Navi Trustee. Of these, seven were acquired by Navi Technologies as part of its inorganic growth strategy.
  • The company also plans to expand its product portfolio by launching adjacent lending and insurance products to capture a larger wallet share of customers. The company’s core business includes lending (personal loans, home loans, others), health insurance, asset management, and microfinance through CIFCPL.
  • Lending continues to be the mainstay of Navi’s overall revenues, with a 43.97 percent contribution for the nine-month period ending December 31, 2021. The contribution of lending business which comprises personal loans, house loans, and others stood at Rs 333.57 crore for the FY 2020-21, a 42.77 percent contribution to the overall numbers.
  • Nearly 26.32 percent of Assets Under Management (AUM) for NFPL for FY 2020-21 came from customers in the low-income group earning up to Rs 25,000 per month. Around 1.53 percent of NFPL’s AUM attributable to such customers experienced default in repayment obligations during the period.
  • The company’s microfinance business, CIFCPL, contributed to 32.5 percent of its total income for the nine month period ending December 31, 2021. The contribution of microfinance to total income was Rs 231.5 crore or 29.68 percent for FY 2020-21. CIFCPL has also applied for a universal banking license with RBI.
  • For FY 2020-21, Navi derived 19.73 percent gross direct premium income through its health insurance product, a contribution that grew to 28.20 percent for the nine-month period ending December 31, 2021.
  • The DRHP also mentions a show-cause notice issued to Sachin Bansal on July 1, 2021, under provisions of FEMA in relation to foreign investments in Flipkart. It states that Sachin Bansal has divested a 100 percent stake in Flipkart as of 2018 and has no association with the business of the company.

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