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

The merger, approved by its board, will be executed through a share swap ratio of 1:1, under which every shareholder of microlender Vector Finance will receive one share of Dhruva Capital.

The scheme of merger is subject to approvals from regulators, shareholders, creditors and the National Company Law Tribunal, the company said.

Vector Finance, with assets under management (AUM) of Rs 390.23 crore and revenues of Rs 27.16 crore as on March 31, 2025, operates across six states with 173 branches.

In FY'25, it disbursed Rs 222.66 crore to over 43,000 customers.

Dhruva Capital Managing Director Shreeram Bagla said the deal would help the company expand into "underpenetrated eastern and northeastern markets and build a stronger, more inclusive financial institution".

Vector Finance chairman Rahul Johri said the integration would reduce borrowing costs, provide access to additional capital, and enable expansion of products while lowering 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 lakh crore with 11.1 crore active loans as of March 31, 2025, with NBFC-MFIs holding the largest share.