International Finance Corporation plans to provide a total of $150 million (Rs 1,020 crore) to two non-banking finance companies controlled by Singapore state investment firm Temasek and private equity giant Warburg Pincus in India.
The World Bank’s private-sector investment arm said in a disclosure that it will invest $100 million in Fullerton India Credit Company Ltd, which is fully owned by Temasek, through subscription to non-convertible debentures (NCDs) or rupee-denominated masala bonds.
In a separate disclosure, IFC said it plans to provide financing of up to $50 million to Capital First Ltd, in which Warburg Pincus holds a 61.09% stake, through five-year secured NCDs.
Fullerton plans to use the capital for on-lending to micro, small and medium enterprises (MSMEs). Capital First will use the funding to back women-owned SMEs.
The investments are part of IFC’s strategic target to reach 10 million MSMEs during 2016-17 through 2020-21.
Mumbai-based Fullerton India was set up in 2007. It focuses on lending to rural and urban micro and small enterprises and also caters to mid-sized SMEs. It also offers loans for affordable housing.
As of 31 December 2016, Fullerton India had total assets under management of around $1.88 billion. It had 528 branches spread across India as of December 2016.
Mumbai-listed Capital First had a loan book of Rs 18,800 crore as of 31 December 2016, of which 91% consists of MSME and consumer financing. It has 48 offices covering 222 locations in India and has financed 3.5 million customers to date.
Capital First’s other shareholders include Goldman Sachs Asset Management, Singapore sovereign wealth fund GIC and Norway’s Government Pension Fund Global.
The company is led by V. Vaidyanathan, who founded the company in a management buyout backed by Warburg Pincus and who has been the chairman and managing director since September 2012.
This is IFC’s second debt investment in Capital First, after a Rs 350-crore funding in 2016.
Apart from lending to companies in India, IFC has an active direct private equity-style investment practice. It also has an active LP, or limited partner, portfolio in India where it backs PE and venture capital funds focused on India.