International Finance Corporation plans to provide Rs 900 crore ($125 million) to L&T Finance Ltd to help the non-bank lender expand its farm equipment financing portfolio.
IFC will offer the funding through five-year senior, secured debt, the World Bank's private-sector investment arm said in a disclosure.
L&T Finance will match IFC's investment by contributing up to $375 million for farm equipment financing. At least 60% of the combined fund will be used for lending in the low-income states of India, IFC said.
The World Bank arm said it may also mobilise additional funding from other investors for the project.
IFC said that this debt funding was part of its measures “in response to the recent liquidity shortage” that NBFCs in India had been facing.
The firm has provided debt funding to other non-bank lenders also recently. Last month, it proposed to make a debt investment of $150 million (Rs 1,068 crore) in non-banking finance firm Bajaj Finance Ltd. IFC’s other recent debt investments include putting $50 million (Rs 350 crore) into Ujjivan Small Finance Bank in November 2018.
IFC has also provided debt funding to many agri-business ventures in the recent past. Last week, it proposed to provide debt funding to DCM Shriram to help the company expand its sugar factory and a power plant. Last month, it said it planned to make a debt investment of up to Rs 106 crore ($15 million) in Hyderabad-based Dodla Dairy Ltd.
Besides debt investments, the World Bank arm makes direct private equity-style bets in India across sectors. It is also an investor in private equity and venture capital firms focussed on India.
L&T Finance is a wholly owned subsidiary of L&T Finance Holdings Ltd, the financial services arm of engineering giant Larsen & Toubro Ltd. About 54% of L&T Finance’s book consists of rural financing, 26% is wholesale financing and 18% is real estate financing. As of December 31, 2018, L&T Finance had assets under management of Rs 43,500 crore ($6.04 billion).
L&T Finance Holdings, through its operating units, provides rural, housing, wholesale and infrastructure finance services as well as investment and wealth management. The company has 12 million customers across India and has an asset base of more than $14 billion.
The proposed debt funding follows IFC’s recent investment of $75 million in L&T Housing Finance, a subsidiary of L&T Finance Holdings.