India’s leading fintech company BharatPe is planning to sell a significant portion of its stake in Unity Small Finance Bank (Unity Bank) to comply with regulatory requirements and raise funds for future expansion. This strategic move involves the sale of up to 25% of its current 49% stake in Unity Bank, aiming to generate approximately $800 million (about Rs 6,500 crore). Rothschild & Co has been entrusted with managing this critical transaction.
Key Highlights
Stake Sale Plans
BharatPe is set to divest up to a quarter of its 49% ownership in Unity Bank, effectively reducing its overall stake in the institution. This stake sale is expected to raise around $800 million (equivalent to Rs 6,500 crore), which will serve dual purposes: meeting regulatory requirements and bolstering the company’s future growth initiatives.
Regulatory Compliance Requirements
The Reserve Bank of India (RBI) has stipulated that BharatPe’s parent company, Resilient Innovation Private Limited, must bring down its shareholding in Unity Bank to 10% by the year 2029. In alignment with these directives, BharatPe has taken the step to initiate the stake sale. To ensure smooth execution, the company has partnered with Rothschild & Co, a renowned global financial advisory firm, to oversee the transaction process.
Unity Small Finance Bank: Establishment and Progress
Unity Small Finance Bank, a joint effort between Centrum Financial Services and BharatPe, came into existence in November 2021. Shortly after its establishment, the bank gained significant traction by successfully acquiring the struggling PMC Bank.
Unity Bank has showcased strong financial performance, as evidenced by its quarterly earnings. In the second quarter of the fiscal year 2024, the bank reported a net profit of Rs 187 crore, a notable increase from Rs 138 crore in the corresponding quarter of the previous fiscal year. Its total income also surged by an impressive 77%, reaching Rs 640 crore during the same period.
Digital-First Banking Model
Unity Bank operates with a forward-thinking digital-first approach, offering seamless banking services through open architecture and partnership-driven business models. The bank is committed to serving both individual consumers and small businesses, leveraging technology to provide efficient and user-friendly financial solutions.
BharatPe: Background and Vision for the Future
Company Overview
Founded in 2018, BharatPe has rapidly risen to become a key player in India’s digital payments and financial services industry. Backed by prominent investors such as Tiger Global, Sequoia Capital (now rebranded as Peak 15 Partners), Dragoneer Investment Group, and Insight Partners, BharatPe has successfully established itself as a household name in the fintech ecosystem.
Strategic Use of Funds
The proceeds from the stake sale in Unity Bank are expected to play a pivotal role in advancing BharatPe’s core operations. The company aims to channel these funds into strengthening its existing financial services and developing innovative products. This strategic allocation aligns with BharatPe’s vision of driving growth and maintaining its competitive edge in the rapidly evolving fintech landscape.
Future Plans and Expansion Initiatives
BharatPe views this stake reduction as more than a compliance measure—it is a strategic opportunity to raise substantial capital for its future endeavors. The company plans to utilize the proceeds from the sale to expand its financial service offerings, explore new product categories, and invest in technology-driven innovations.
Summary Table
| Category | Details |
| Why in the News? | BharatPe plans to sell 25% of its stake in Unity Bank. |
| Stake Sale | Up to 25% of BharatPe’s 49% stake in Unity Bank. |
| Estimated Funds Raised | $800 million (approximately Rs 6,500 crore). |
| Reason for Sale | To comply with RBI’s mandate to reduce stake to 10% by 2029. |
| Consultant | Rothschild & Co. |
| Key Achievement | Unity Bank acquired PMC Bank. |
| Profit (Q2 FY24) | Rs 187 crore (up from Rs 138 crore). |
| Total Income Growth | 77%, reaching Rs 640 crore. |
| Business Model | Digital-first banking approach. |
| Major Investors | Tiger Global, Sequoia Capital (Peak 15 Partners), Dragoneer Investment Group, Insight Partners. |
| BharatPe’s Plan | Strengthen financial services and launch innovative products. |
Conclusion
BharatPe’s decision to sell a portion of its stake in Unity Small Finance Bank marks a significant step in its journey as a fintech leader in India. This move not only demonstrates the company’s commitment to adhering to regulatory guidelines but also reflects its strategic intent to leverage the funds raised for expansion and innovation. With a focus on strengthening its financial services and developing new products, BharatPe continues to pave the way for its growth in the dynamic fintech ecosystem.
