IFC pumps $91m into Indian financial services providers

According to VC Circle, IFC - which already holds an equity interest in each company - will make its investment through a subscription to non-convertible debentures (NCDs), lending $35 million, $30 million and $26 million to Magma, Au Financiers and Bandhan, respectively.

Kolkata-based Magma, which is also backed by KKR and ChrysCapital, has a presence in 21 Indian states with total of 280 branches primarily targeting the semi-urban and rural markets. As of the December 2013, the NBFC has a portfolio volume of INR172 billion ($2.7 billion).

It will use the extra capital to augment its capital adequacy and continue its focus on penetrating low-income states. IFC currently holds a 12.1% stake while KKR and ChrysCapital hold a 16.06% and 8.4%, respectively.

AVCJ Research shows that KKR and IFC together bought a 27.5% stake in the business for INR4.4 billion in 2011. ChrsCapital made its first investment in February last year, paying INR1.25 billion.

Au Financiers - which is backed by Warburg Pincus, Motilal Oswal and ChrysCapital - provides loans to low-income borrowers and small and medium-sized enterprises (SMEs) in semi-urban and rural Rajasthan and several other states. It has also has a housing finance subsidiary - Au Housing Finance Limited - that provides small ticket affordable housing loans.

Au Financiers has received several rounds of funding. Motilal Oswal invested an undisclosed amount in 2008, followed by INR200 million the next year. It then returned a third time with INR200 million while IFC put in INR350 million.

Warburg Pincus invested $50 million in 2012 alongside IFC, providing a partial exit for Motilal Oswal. Chrys Capital then came in last year paying INR1.2billion for a 10% while Motilal Oswal divested a 7% stake.

Bandhan operates India's largest microfinance institution with more than 2,000 branches in 22 states across India. It has a borrower base of more than five million women and a loan portfolio of around INR54 billion.

IFC's investment will enable Bandhan to increase its regulatory capital and to expand its outreach to borrowers who have little access to formal sources of financing.

Its shareholders in the firm include Financial Inclusion Trust, North Eastern Financial Inclusion Trust and the Small Industries Development Bank of India (SIDBI) which acquired an 11% stake or INR500 million in 2009. IFC invested $35 million in Bandhan in 2011.

 

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• Topics
• Financials
• South Asia
• IFC
• India
• Financial Services
• Structured finance
• NBFCs