MSPEA backs Indian NBFC Kogta Financial
Morgan Stanley Private Equity Asia (MSPEA) has led a INR1.54 billion ($22.1 million) investment in Indian non-banking finance company (NBFC) Kogta Financial.
Kogta operates 80 branches across six states in central and west India, offering financing for commercial vehicles, tractors, and cars, along with lending to micro, small, and medium-sized enterprises (MSMEs). The company had a loan book of about INR5.3 billion as of September 2018.
According to a statement MSPEA contributed INR1.14 billion to the current funding round, with existing investor IIFL Seed Ventures committing the rest. The new capital will be used to expand its operations and enter new geographies, with Kogta leveraging Morgan Stanley’s financial expertise to help strengthen its systems and processes.
“The retail lending space in India offers tremendous opportunity. We believe that Kogta is well placed in its lending segment with strong retail focus, secured product offerings, robust collection mechanisms and disciplined asset-liability management,” said Arjun Saigal, co-head of MSPEA in India.
Kogta’s new funding round comes as India’s NBFCs face issues with liquidity. The country’s banks are increasingly cautious about lending to NBFCs after some institutions defaulted on short-term loans this year, most notably Infrastructure Leasing & Financial Service (IL&FS), which filed for bankruptcy last month.
The Reserve Bank of India (RBI) and State Bank of India have both taken steps in recent months to stabilize the industry at the encouragement of the government, which sees NBFCs as an innovative link between underserved populations and the formal banking system.
A number of PE investors have exposure to the NBFC sector, either through investments in existing institutions or through their own lending entities. MSPEA’s activity in the space includes several rounds for Five Star Business Finance, a south India-based NBFC focused on small and medium-sized enterprises.
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