Complete Selling Guide for Your NBFC in India

Introduction

The Non-Banking Financial Company sector is booming enormously in today’s world in India, and plays an important role in financial inclusion and economic development.

But, successful entrepreneurs who have already established an NBFC may sell the NBFC. But then, the value you now unlock with its sale in this way could open other new business possibilities.

Focused on selling an NBFC in India is the specificity of selling such a capital company and hence empowering it to clear your confusion further.

In any emerging developing country like India, sustained investments by the private sector mark large growth.

Historically, credit has expanded faster than gross domestic product (GDP) in the Indian economy. The growth of bank credit over nominal GDP growth varied between 1 and 2, with an average of 1.42 during the period from 1962 to 2019.

For most of this period, banks have been the leading source of credit in the formal economy while bond markets and nonbank lenders were a much smaller source of credit.

This will enable one to understand the culture of India-specific NBFCs. Microfinance companies are financial institutions, such as investment firms, amongst others.

If you are selling your NBFC, you would want to know what the market looks like.

The registration of the NBFC in India is primarily based on certain categories further determined by various factors such as size, activity, and leverage of the NBFC.

If one is a depositor or non-depositor, then the sales process will be influenced based on the rules governing the sales process.

Depending upon if the financial services target individuals, small businesses, or big businesses; a business model and target market of one’s chosen financial services.

Additionally, a strong financial background, good loan portfolio, and sound investment strategies will fetch any interested buyer as demonstrated by a proven track record.

Why sell your NBFC?

The selling of one’s NBFC greatly depends upon various factors that might have an effect on the decision, but here are a few reasons in general.

NBFC is a transitory in nature and consolidation by mergers and acquisitions result in a profitable way out of the company.

You can sell your NBFC when nearing retirement or where succession planning is not well defined. Selling your NBFC would ensure a smooth transition to the business and all its stakeholders.

A change in market focus, regulatory changes or new business pursuits are behind what may have become necessary to sell an NBFC to redeploy capital.

Read Blog: NBFC Registration

Important steps prior to entering the market will help you achieve a large amount of sum from your NBFC selling price:

A. The improvement in your financial, as well as profitability position, will be huge before entering the market. The stability of loans as well as the capital cost.

B. Complete the RBI regulations and NBFC licensing process with all formalities.

Scaling up: It must describe an upward growth trajectory, focus on new markets and product lines or technology-based developments

Productivity efficiency: well-placed controls in an efficient business process, good and very structured organization

Gathering and making all current, very detailed information, especially financial statements, loan options, and approvals on a regulatory level so the would-be buyer is given free rein to carry out due diligence on the buyer

Short-listing the suitable buyer by evaluating your options:

Bestseller finds the best buyer for selling. There are various people whom one could approach as targets to the NBFCs as discussed next:

The deal is sealed, and it is all set.

The conclusion follows when all the documents that are required to seal in all the arrangements are approved. Transfer of Ownership, all the financial settlements and the deed of sale get signed

A well-planned post-sale transition can help mitigate the impact on employees, customers, and operations. Communicate the sale and transfer of responsibilities to the new owners.

Closing: Once the approval and agreement are cleared, the closing happens. In it, the transfer of ownership does along with the closing all other financial transactions excepting signing of definitive sales document.

Post-Sales Transition: Proper transition can serve to reduce the disorganisation already being caused to both employees and customers along with the already moving operations. Make sure that all aspects regarding the sales transaction, whether ambiguous or clear cut are addressed and there will be a smooth handing off all operations to the new owner.

Beyond the Sale: Future Prospects

Once you have sold your NBFC, there are just a few more things that you would need to see to:

Non-compete clauses: Depending upon your sale agreement, you’ll be having non-compete clauses where you cannot undertake a similar business for certain number of years.

Tax Implications: You must approach tax consultants to discuss all tax implications of your sale of NBFC.

New Business Ventures: The sale proceeds can be further used for new business ideas or investment opportunities that are aligned with your long-term interests.

Selling an NBFC is complex and requires professionals to be at the helm of affairs.

Consider tieing up with:

Investment Bankers or M&A Advisors: Such advisors would help in building valuation, approaching buyers, and negotiations.

Legal Counsel: M&A lawyers would ensure that your sale agreement is well written and safe for you.

Tax Advisors: Tax professionals would make you abreast of tax implications of the sale and ensure that you don’t pay much by way of taxes.

By using the proper resources and professional advice, you’ll be able to sell your NBFC without any hassle and leave a long-term legacy in the Indian financial sector.

Conclusion: Selling Your NBFC- A Strategic Decision with Rewards

Selling your NBFC is sometimes a complicated but rewarding process. With proper preparation of your company, identification of a proper buyer, and navigating through a sale process strategically, the overall transaction will be a successful one. This rich guide has provided you with the knowledge to make your decisions, bringing up the maximum value that can be achieved from your NBFC. Remember, you are not just selling off your NBFC; that is, you are strategizing on how to fully reap the fruits of labor while opening you up for the next series of fantastic adventures in finance.

Read Blog: Nbfc Regulations In Ghaziabad