International Finance Corporation (IFC) is planning to make a $45 million equity investment in an unnamed public-listed mid-size Indian non-banking finance company (NBFC). The investment’s goal is to help expand access to finance for micro, small and medium entrepreneurs. Notably, though the investee company is undisclosed, its focus is on ‘asset-backed financing’, in contrast to the uncollateralised lending used in most microfinance models. The demographic and geographic focus is on base-of-the-pyramid consumers in rural and “semi-urban” locations. The funds will be targeted at helping consumers with housing finance an area of the market that has seen a number of new entrants including Mahindra & Mahindra Financial Services, Muthoot Fincorp, Shriram Capital, and Dewan Housing Finance.
By TEAM VCC
Although the name of the company is not disclosed yet, it is planning to raise $100 for implementing growth plans
International Finance Corporation (IFC) plans to invest $45 million as equity in an unnamed public-listed mid-size Indian non-banking finance company (NBFC) for expanding access to finance for the micro, small and medium entrepreneurs.
Although the name of the target company stands undisclosed, its primary business is ‘asset-backed financing’ – focused on providing funds to the bottom-of-the-pyramid stratum in rural and semi-urban areas. The NBFC has significant presence in the low-income states across the country. It can be either a rural consumer finance firm or a gold loan company or a commercial vehicle finance firm.
The company is planning to raise $100 million or Rs 450 crore for meeting its growth plans and IFC proposes to invest up to $45 million.
The NBFC already has pan-India operations with a large branch network spread across the country and is now looking to develop it further in a bid to have a deeper penetration in rural and semi-urban areas. The firm is expected to enhance its rural presence by deepening its existing branch network through the hub-and-spoke model.
The money will help the company to set up and expand its low-income housing finance business through a subsidiary in India. It has further plans to use its current financing model in select countries in South Asia and Africa.
Some firms who have entered or have plans to enter low-income housing finance business include Mahindra & Mahindra Financial Services, Muthoot Fincorp (not to be confused with the listed company Muthoot Finance), Shriram Capital (it has two listed finance firms in the group) and Dewan Housing Finance.
Incidentally, IFC had last year picked a minority stake in Adhar Housing Finance Pvt Ltd, a new company floated by Dewan Housing and targeted at low-income housing finance segment.
For the private sector investment arm of the World Bank which has been announcing back-to-back deals almost every week in India this year, this deal will push its total committed capital (equity & debt) since January 1, 2011, in the country to $470.5 million.