International Finance Corporation plans to offer up to $100 million (Rs 700 crore) in debt funding to Tata Motors Finance Ltd, the World Bank's private-sector investment arm said.
The proposed investment comprises a senior, secured funding of up to five years either through external commercial borrowings or by subscribing to non-convertible debentures issued by the non-bank lender, IFC said in a disclosure.
The company will match IFC’s investment with $300 million from other sources to create a $400 million pool for financing commercial vehicle purchases by small and medium enterprises (SMEs) in low-income states of India.
Mumbai-based Tata Motors Finance is a step-down unit of automaker Tata Motors Ltd. The non-banking financial company finances the entire range of Tata Motors’ commercial vehicles and passenger cars.
Tata Motors Finance has more than 270 branches across India and is the largest financier of Tata Motors vehicles. As on March 31, it had Rs 31,800 crore in assets under management.
IFC has backed several other Indian non-bank lenders in recent weeks, as it deepens its bet on segments that offer loans for low-cost houses and that cater to SMEs.
Last week, it said it planned to make a debt investment of up to $75 million (Rs 525 crore) in Mahindra & Mahindra Financial Services Ltd to help it augment lending to micro, small and medium enterprises.
Earlier in April, IFC said 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.