ICICI Venture’s mezzanine fund is making an investment of $10 million (Rs 40 crore) in Ahmedabad-based microfinance institution MAS Financial Services Ltd. This could be ICICI Venture’s first exposure to a financial services company. The company is also close to getting a fund infusion of $10 million from Dutch development bank FMO. MAS Financial is planning to use the proceeds to augment Tier-I and Tier-II capital and fund its technology infrastructure investments, reports Hindu Business Line.
MAS Financial Services has also tied up with Reliance Capital, the financial services arm of Reliance ADAG, for a microfinance initiative. MAS was formed as a NBFC in 1988, and specialises in retail financing and is engaged in semi-urban micro-lending. It is also involved in vehicle financing, primarily two- and three-wheelers and multi-utility vehicle.
MAS has a large presence in Gujarat with 62 branches in major cities and over 1600 service centres. The company has opened up a branch in Mumbai and now plans to expand in Maharashtra and Rajasthan. FMO has invested through compulsorily convertible preference shares, while ICICI Ventures has invested through redeemable preference shares and warrants.
ICICI Ventures mezzanine fund is named as India Advantage Fund VII with a target corpus of $110 million. Mezzanine finance can be used to raise money without diluting too much equity. Usually it is provided initially as debt with a certain coupon with an option to convert into equity after some time. This is ICICI Ventures mezzanine fund's second investment, the first one being Rs 32 crore in a biotech company.
Dutch entrepreneurial development bank FMO, has previously invested in micro-finance funds such as Bellwether, Aavishkar Goodwell and LokCapital. It has also invested $25 million in Rabobank’s food and agriculture fund.