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Planning an NBFC takeover in India? Connect with Enterslice for expert regulatory guidance and end-to-end support to help you smoothly obtain approval for the takeover of NBFCs in full compliance with the RBI norms.
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With over 500+ successful fintech entrepreneurs, Enterslice will help you with a successful NBFC Takeover and enter India’s thriving fintech space.
NBFC takeover refers to the process of acquisition of one Non-Banking Financial Company (NBFC) by another company/ NBFC, registered under the Companies Act, 2013. The entire process is regulated by the Reserve Bank of India under the Non-Banking Financial Companies (Approval of Acquisition or Transfer of Control) Directions, 2014.
Whether you are a fintech startup, digital lender, or international investor, acquiring an NBFC in India, gives access to regulated financial services, such as lending, credit, and digital payments under the RBI supervision. Buying an NBFC online further provides a quicker route to enter the Indian financial market, resulting in high demand for digital financial services.
The process of NBFC takeover, which is subject to the regulations of the RBI, SEBI, and other relevant regulatory bodies, involves complex transactions that involve legal, financial, and regulatory considerations. Connect Enterslice to fast-track your market entry with a legally structured NBFC takeover, with no hidden delays, no regulatory hassle.
Partial or full acquisition or transfer of shareholding, management, and control
Acquisition of more than 26% shareholding requires mandatory approval from the RBI
Prohibit applying for a fresh NBFC license, for quick market entry
Opportunity to offer regulated financial services under RBI supervision
Ideal for fintech, digital lenders, and international investors
Strong digital infrastructure and expanding financial inclusion
Sign a Custom Share Purchase & Business Transfer Agreements (SPA/BTA)
The non-banking financial company takeovers can occur through various strategic approaches, providing businesses a suitable path for expansion or entry into the financial market, as discussed below:
A friendly takeover is a type of non-banking financial company takeover that occurs between the companies with their mutual consent. Here, the target NBFC is amicably acquired by the acquirer NBFC, subject to the terms and conditions agreed upon between them. This type of takeover is generally characterized by a smooth process, allowing both parties to achieve a better per-share price, and opportunities for business growth.
A hostile takeover is the direct acquisition of the target company by the acquirer company through reaching the company's shareholders or fighting to replace management to get the acquisition approved. Usually, this kind of non-banking financial company takeover occurs when an entity attempts to take control of another company without the consent or cooperation of the target company's Board of Directors.
The funding-based takeover is a type of non-banking financial company takeover that ensures the acquisition of finances, such as cash, debt, or shares of the target NBFCs. This type of takeover is one of the most common situations where the acquirer NBFC maintains liquidity while gaining control over the other entity.
A distressed asset takeover is a type of non-banking financial company takeover that authorizes the acquisition of riskier shares of the target NBFC. This type of takeover is often considered a part of a turnaround or restructuring strategy that injects capital, undertakes debt resolution, and improves the operational management of the target company.
The procedure for NBFC takeover, which mandates the acquisition of NBFCs through filing applications to the Regional Office of the Department of Non-Banking Supervision, in whose jurisdiction the registered office of the NBFC is located, is as discussed below:
Initially, both the acquirer and target company are required to sign the Memorandum of Understanding (MOU), which mentions each company's responsibilities and requirements during the takeover.
After signing the MOU, both the target and the acquirer company must conduct a board meeting on the matters concerning the company’s purpose of granting approval and replying to queries related to or asked by the RBI.
Before starting the proceedings for the takeover of NBFC, the acquirer company must review the crucial aspects, including recognition of financial and strategic goals, thorough background verification, NBFC market analysis, and assessment of financial aspects.
After receiving the approval from the RBI, a public notice shall be made within 30 days of the approval in two newspapers, which are prevalent in the areas where the NBFC is primarily functioning. The Public notice is made to check if there are any objections from the public regarding the takeover.
Further, both entities must sign a share transfer agreement (share purchase agreement), depending upon the mutual consent of the parties, and the acquired company shall pay the remaining amount.
Before officially signing the share transfer agreement for the takeover of NBFC, the target company must necessarily obtain a NOC (No Objection Certificate) from all creditors.
The next step allows for the liquidation of all the assets of the target NBFC. The assets of the target NBFC are transferred to the acquiring NBFC, and the liabilities are paid off.
The next step requires adopting the Discounted Cash Flow (DCF) Method for cost assessment, which presents the entity's net present value. After the evaluation, the chartered accountant shall issue a certificate briefing on the method adopted for valuation.
Upon successful evaluation of the entity’s net present value, an application (notice) must be duly filed with the RBI regional office, to obtain approval on its letterhead. Additionally, all the changes made after the takeover must be intimated to the RBI from time to time.
Lastly, all the liquidated assets and paid-off liabilities of the target company, as shown in its balance sheet, must be transferred to the bank account of the acquirer company, ensuring calculation done based on the net worth on the date of takeover of the company.
The process for the takeover of NBFC in India, which typically takes around 3 to 6 months, varies based on the complexity of the transactions and the time taken for RBI approval, as provided below:
It takes around 1 to 2 weeks to make preliminary discussions and identify a suitable NBFC for acquisition by the acquirer NBFC.
It takes approximately 3 to 4 weeks to verify RBI compliance and conduct financial, legal, and regulatory due diligence on the target company.
It takes approximately 1 to 2 weeks to prepare and finalise the terms and conditions of a share purchase agreement (SPA) or business transfer agreement (BTA).
Within 30 days of filing the share purchase agreement, the entities must submit a takeover application along with the necessary documents to the RBI.
It takes approximately 2 to 3 months for the RBI to review and approve the application in accordance with the Non-Banking Financial Companies (Approval of Acquisition or Transfer of Control) Directions, 2014.
It takes around 2 to 3 weeks to adhere to the post-approval formalities, such as a change in shareholding pattern, publishing a public notice in the newspaper, updating the ROC, and securing operational transition.
The entities must submit the list of following documents and information needed with the company’s letterhead for the NBFC takeover in India:
Directors and Shareholders information
Non-criminal & non-conviction (u/s 138 of NI Act) statement
Declaration of association and non-association
A bankers and due diligence report
3 years’ financial statement
Company’s legal documents
PAN Number and KYC documents
NBFC business plan
Acquirer’s source of capital
Directors’ Identification Number (DIN)
Registered Business Address
Other statutory information about the company
The NBFC takeover, with credit demand at an all-time high in India, offers various benefits to businesses seeking expansion in India’s financial sector. Consider the following benefits of the Non-banking financial company takeover in India-
NBFC takeover enables business expansion, allowing the acquiring company to expand its presence into the untapped or underserved markets across India.
The NBFC takeover provides a gateway to a new market landscape, allowing the acquiring company to understand customer behaviour, local challenges, and market dynamics.
Another benefit of the NBFC takeover is the acquisition of the competitive market’s specialised skills and updated technological developments already existing in the target NBFC.
The NBFC takeover facilitates the diversification of the product portfolio, thereby reducing reliance on a single line of business.
The NBFC takeover often leads to increased revenues and profits by tapping into an established client base and market share of the company.
NBFC takeover by another acquiring company can result in cost savings and improved operational efficiency, ultimately enhancing profitability and economies of scale.
An NBFC takeover allows the acquiring company to inherit the target NBFC’s existing licenses, approvals, and regulatory clearances, which eliminates the need to apply for fresh registration.
An NBFC takeover significantly enhances the acquiring company’s brand visibility and credibility, leveraging increased goodwill and trust in the financial sector.
The applicant entities must ensure compliance with the following pre-requisites before applying for NBFC takeover with the RBI:
The entity planning for takeover of NBFC in India must assess whether prior approval from the RBI is required. While certain transactions mandate RBI approval, others may be exempt under specific conditions, as discussed below:
When RBI Approval is Required
When RBI Approval is not Required
The NBFC takeover guidelines must be duly complied with to uphold the regulatory standards, investors’ confidence, and the integrity of the NBFC. Have a look at the following post-takeover compliance requirements, as provided below:
At Enterslice, we offer specialised and regulated process NBFC takeover in the manner as outlined by the RBI. Connect our team to ensure full compliance with all legal and procedural requirements, making the takeover journey smooth, strategic, and hassle-free.
Have a look at some of the reasons why Enterslice is considered the best choice for NBFC takeover:
NBFC takeover is the process where one company acquires another NBFC, gaining control either through a share purchase or by altering the shareholding by 26% or more. It is considered a strategic move that allows businesses to expand and diversify their business operations within the financial market.
The process for NBFC takeover requires prior approval of the RBI (upon fulfilment of specific conditions). Have a look at the detailed procedure which requires compliance with the following steps needed for the takeover of an NBFC in India:
Yes, you need a minimum net-owned fund (NOF) of Rs. 2 crores for the NBFC takeover, increasing up to Rs. 5 crores, depending upon scale-based regulations. Additionally, a buyer company (i.e., the acquirer company) must be prepared with Rs. 5 crores to meet the RBI’s requirements.
Yes, you need to submit the last 3 years' income tax return as an income proof to the RBI, at the time of takeover of NBFC.
Yes, maintaining a minimum CIBIL score of 700+ and no-dispute or write-off of loans in the past 24 hours, is often relevant for minimizing risk potential at the time of NBFC takeover in India.
Yes, the RBI registration for the NBFC takeover is mandatory for any change in management or transfer of assets.
Before proceeding with a change in management, transfer of shares, or sale of an NBFC, an NOD, i.e., notice of determination, has to be obtained from the RBI.
For a name change, you need to obtain a name availability certificate from the MCA. Afterwards, you can contact the RBI for NOD. Once NOD is granted, you can proceed with the name change.
The Reserve Bank of India, i.e., RBI is the authority responsible for controlling and approving the NBFC takeovers in India.
No, NBFCs cannot engage in the acquisition of securities issued by the government.
The market size of NBFC takeovers from Jan. 1st, 2017, to May 31st, 2018, is the highest among all sectors. Approx. 23.7% of open takeover offers were launched for listed NBFCs under the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations 2011. Hence, the interest in NBFC takeovers is expected to rapidly grow in comparison to the registration of NBFCs and other banking institutions.
In the ordinary course of business, the takeover of NBFC usually takes 3 to 6 months, subject to regulatory delays (if any).
The NBFCs in India have a promising future scope, playing a substantial role in the technological adoption, partnership with fintech companies, digital onboarding and loan management, offer BNPL products, bring innovation in lending products, contribution to green financing and sustainable development, financial products for agri-businesses, focus on socially responsible investments, financial inclusion, mentorship programs for women, and other financial literacy initiatives.
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Researchers have found out that organization using new technologies in their accounting and tax have better productivity as compared to those using the traditional methods. Complying with the recent technological trends in the accounting industry, Enterslice was formed to focus on the emerging start up companies and bring innovation in their traditional Chartered Accountants & Legal profession services, disrupt traditional Chartered Accountants practice mechanism & Lawyers.
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“Excellent advisory role by Enterslice Team. They are a trusted partners to us. Narendra and his team helped us with our pre NBFC applications and Post NBFC advisory services.”
“Amazing services provided by your organization. They have completed our NBFC registration order within stipulated time period of 90 days. They provide constant guidance and support in the process. Their support in building fintech software is amazing.”
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“They provided customized and Highly skilled CA &services. The management invests themselves in your work. They ensured timely NBFC registration and are always ready and prepared with excellent advisory services. The best part of working with Enterslice is they are not having expertise of law but they are well versed with Digital marketing skills &fintech business model.”
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Haiden Group - UAE
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