Private equity interest in the microfinance space continues unabated. Matrix Partners India, a Mumbai-based venture capital firm, is investing Rs 100 crore in Bhartiya Samruddhi Finance Ltd (BSFL), the Hyderabad-based flagship company of microfinance major BASIX Group, promoted by Vijay Mahajan.
The round will also witness two existing investors participating to contribute another Rs 18 crore, said a company statement. Hivos Triodos Fonds and Lok Capital Llc are the two other investors participating in this round.
Though the company did not disclose the amount of stake the firm is diluting against this transaction, a Mint report suggests that it is around 15%. VCCircle had earlier reported BSFL’s fund raising plan in November last year.
Sajeev Viswanathan, managing director, BSFL said, in the statement, “the capital provides BSFL a very strong balance sheet and will help us to leverage scale and enhance operational efficiency.”
The round follows $10-million (around Rs 44 crore) investment raised by the company a year ago. In April 2009, BSFL raised the fund from Lok Capital LLC, Aavishkaar Goodwell and Small Industries Development Bank of India (SIDBI).
The other existing investors of the company include International Finance Corporation (IFC), Shorecap International Ltd, ICICI Bank Limited and HDFC.
The MFI currently has a loan portfolio of Rs 1,000 crore. It has operations in 15 states, and serves over 1 million credit, 2 million insurance and 5 lakh agri and business services customers. It has also expanded its presence in relatively under-served states like Jharkhand, Bihar and the Northeast.
Matrix Partners India, on the other hand, currently has Rs 1,500 crore under management. It follows sector-agnostic investment strategy in the range of Rs 125 crore and targets companies in the Indian domestic market. Some of its portfolio companies include FIITJEE, Itzcash Card, Siesta Hospitality and Tree House.
The private equity interest in microfinance space has been growing significantly in recent times. Recently, Chennai-based MFI Smile Microfinance Ltd has raised Rs 50 crore from Developing World Markets (DWM), a US-based fund manager. Grameen Koota, Asirvad and Grama Vidiyal Micro Finance Ltd have also raised funding in recent times.
According to Samir Bali, Partner – Business Advisory Services & National Leader, Insurance Sector, Ernst and Young India, “the potential of microfinance sector can be gauged by the substantial estimated demand of Rs1.2 trillion of microcredit from 120 million households. Currently, the Indian microfinance sector has provided about Rs160 billion worth of loans as of March 2009, out of which MFIs account for Rs114 billion, which has increased by 90% over 2008.” Bali added that there exists a total of over 3,000 MFIs and NGOs, with the leading 10 MFIs accounting for 74% of outstanding loans.
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