Sachin Bansal weighs options after RBI denies banking licence

The Reserve Bank of India (RBI) has rejected the banking licence application of Chaitanya India Fin Credit Pvt Ltd, the company owned by Flipkart co-founder Sachin Bansal.

Three applicants, including Navi Technologies' subsidiary Chaitanya India Fin Credit, were found unsuitable under the guidelines for "on tap" licensing of universal banks.

The central bank's announcement came when Bansal was addressing a virtual press conference to launch Navi Finserv's maiden issue of non-convertible debentures (NCDs) worth ₹600 crore.

Navi Finserv is the non-banking finance arm of Navi Technologies.

Bansal, however, said this is not the end of the road and the company would also consider re-applying. "We are going to evaluate the written response and chart out our next course of action. A lot of options are there in front of us and there are many things to explore like re-applying. The news is just out and we will have to wait for RBI's written responses and then respond," said Bansal.

"We will consider whether we want to appeal this and weigh our options," he added.

Navi Technologies, which is planning an initial public offering, had filed the draft papers with market regulator Securities and Exchange Board of India (SEBI) in March. The fintech aims to raise ₹3,350 crore through this issue.

The company offers personal loans, home loans, general insurance, asset management services and microfinance loans.

Promoter Sachin Bansal, who holds 97.77% stake in the company, will not be offloading his shares in the IPO. Most of the proceeds from the IPO will be invested in two subsidiaries of the company – Navi Finserv Pvt Ltd (NFPL) and Navi General Insurance Ltd (NGIL).

Funding to the two subsidiaries is meant to help them meet their capital requirements for the future. The rest will be utilised for general corporate purposes, the company had said in its draft red herring prospectus (DRHP) filed with the market regulator.

Bansal exited Flipkart in 2018 when U.S. retail giant Walmart acquired a 77% stake in the e-commerce firm for $16 billion. His stake reportedly fetched him $1 billion. Since then, Bansal has invested in various startups in the country.

Navi Finserv NCD issue

The NCD issue opens on May 23, 2022, and is scheduled to close on June 10, 2022, with an option of early closure or extension. The company said the NCDs will be of face value of ₹1,000 each for an amount aggregating up to ₹300 crore, with a green-shoe option to retain an oversubscription of up to ₹300 crore.

Investors will get a chance to participate in secured NCDs under various series for a tenure of 18 months and 27 months with an effective yield of up to 9.80% and a minimum application size of ₹10,000, says the company.