Non-banking financial company Dhruva Capital Services Ltd on Friday announced a strategic merger with Vector Finance, marking its entry into the microfinance sector.

The merger, approved by Dhruva Capital’s board, will be executed through a 1:1 share swap, under which each Vector Finance shareholder will receive one share of Dhruva Capital. The scheme is subject to approvals from regulators, shareholders, creditors, and the National Company Law Tribunal.

Vector Finance, with assets under management (AUM) of Rs 3.90 billion and revenues of Rs 271.6 million as of 31 March 2025, operates across six states through 173 branches. In FY25, it disbursed Rs 2.23 billion to more than 43,000 customers.

Shreeram Bagla, Managing Director of Dhruva Capital, said the merger would help the company expand into underpenetrated eastern and northeastern markets and build a stronger, more inclusive financial institution. Vector Finance Chairman Rahul Johri added that the integration would lower borrowing costs, provide access to additional capital, enable product expansion, and reduce interest rates for customers.

According to the Small Industries Development Bank of India (SIDBI), the microfinance industry’s outstanding portfolio stood at Rs 3.35 trillion, with 111 million active loans as of 31 March 2025, with NBFC-MFIs holding the largest share.