OPIC commits $185m to India SME sector
The Overseas Private Investment Corporation (OPIC), a development finance arm of the US government, will invest $185 million in India’s small to medium-sized enterprise (SME) sector.
The money will be directly invested in Cholamandalam Investment & Finance, a local financier that specialists in SME support. According to a release, the commitment is planned to allow more than 25,000 entrepreneurs in low-income areas purchase vehicles and equipment to expand their businesses.
Cholamandalam has received substantial investment to this end, including a $74 million commitment from the International Finance Corporation (IFC), $83 million from Apax Partners, and a combined $40 million from local investor Multiples Alternate Asset Management with Malaysia-based Creador. Earlier this year, IFC joined a $222 million round for the company that included contributions from a number of regional banks.
There are about 30 million SMEs in India. The sector accounts for 45% of national industrial output and 40% of exports, according to the Europe-India SME Business Council. The space is attracting increased attention, with deals in recent weeks including a $21 million round for loan services player Indifi Technologies by CDC Group and an approximately $13 million investment by Quona Capital in SMECorner, a similar microlending platform.
Founded in 1978, Cholamandalam operates 999 branches across India with assets under management of INR575 billion ($8.1 billion). Its SME loans typically fall in a range of INR1-50 million with an emphasis on flexible terms and repayment options. Additional business lines include vehicle finance, rural and agricultural loans, home loans, investment advisory, wealth management, and stockbroking services.
Cholamandalam was Creador’s first-ever investment in 2012, when the private equity firm paid $21.3 million for a 5% stake. Three partial exits were made on the investment, with the final divestment in 2016 generating a total 3.7x return and an IRR of 39% in dollar terms. Apax completed a staged exit from the company in 2017, claiming to have realized a return of $248 million versus an initial investment of about $70 million.
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