GIC invests $50m in India's Capital First
Singapore sovereign wealth fund GIC Private has invested INR3.4 billion ($50.3 million) in Capital First, an Indian non-banking financial company (NBFC) backed by Warburg Pincus.
GIC will make its investment through its affiliate Caladium Investment, which will receive 4.78 million shares priced at INR712.70 each - a premium to the closing price of INR595.35 on November 11 - according to a release. The purchase will give GIC an interest of about 4.9%. Warburg Pincus will continue to hold a majority stake following the investment.
Following the transaction, Capital First's total capital will increase to INR32.6 billion, including both tier-one capital, which consists of equity, and tier-two, which comprises debt instruments and reserves. Its capital adequacy ratio will increase from 19.1% to 21.6%.
Capital First specializes in micro, small and medium-sized enterprise (MSME) and consumer financing, including home and vehicle loans, loans to salaried corporate employees and loans against property. The company claimed to have grown its assets under management to INR179 billion as of September 2016, representing 32% year-on-year growth, with its retail loan portfolio contributing to 90.1% of overall assets under management.
In its most recent annual report Capital First recorded revenue of INR18.5 billion, up from INR14.3 billion the year before. Net profit grew from INR1.1 billion to INR1.6 billion over the same period.
Warburg Pincus has owned Capital First since 2012, when it paid INR8.1 billion for a 71.9% stake in the company, then called Future Capital, in a management buyout from its previous owners, the Future Group. The GP later invested an additional INR1.28 billion in 2014, alongside HDFC Standard Life Insurance, which committed INR500 million.
NBFCs have become increasingly important to India's financial system, with policymakers showing particular enthusiasm for the institutions as a way for the country's small and medium-sized enterprises (SMEs) to gain credit and for rural populations to access financial services. Recent PE investments in the industry include a $25 million commitment to IFMR Capital by Eight Roads Ventures India and a $149 million round for Hero FinCorp led by ChrysCapital.
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