International Finance Corporation plans to make a debt investment of up to $75 million (Rs 525 crore) in non-bank lender Mahindra & Mahindra Financial Services Ltd.
The investment will help the non-banking financial company to augment lending to micro, small and medium enterprises, the World Bank's private-sector arm said in a disclosure.
IFC said that--apart from the three-year senior, secured debt investment--it may also mobilise additional funding from other investors for the company. Separately, Mahindra Finance--as the company is commonly known--will allocate an amount equal to three times IFC’s loan from its own balance sheet or other sources to lend to the MSME segment.
IFC also said that at least half the proceeds of its loan are likely to be earmarked towards women-owned SMEs and the remaining for growth of MSMEs in low-Income states of India.
Mumbai-listed Mahindra Finance is a rural-focussed NBFC and the financial services arm of the auto-to-software Mahindra & Mahindra group. It offers vehicle and tractor loans, SME loans as well as fixed deposits via more than 1,300 branches across India.
IFC's planned investment comes a little less than two years after it put in $100 million in Mahindra Finance via non-convertible debentures.
The World Bank arm has backed several other Mahindra group companies in the past. These include providing debt financing of $150 million to Mahindra Renewables Pvt. Ltd to construct a solar power plant in Madhya Pradesh last year and $50 million to help Mahindra Lifespace Developers Ltd set up three industrial clusters in 2017.
IFC has been investing in several Indian mortgage lenders and NBFCs, as it deepens its bet on segments that offer loans for low-cost houses and that cater to SMEs.
This month alone, IFC has said that it planned to make a debt investment of $150 million in mortgage lender Piramal Capital & Housing Finance Ltd and $125 million in L&T Finance Ltd to help it expand its farm equipment financing portfolio.
Last month, IFC said it planned to offer $35 million to DCM Shriram Ltd to help the agribusiness company expand a sugar factory and install a power plant.
Apart from lending to companies, IFC actively backs private equity and venture capital funds in India. It also has an active direct private equity-style investment practice in the country.