Bangalore-based Ujjivan Financial Services Pvt Ltd, a microfinance institution focused on India’s urban poor, has raised Rs 45 crore ($8.3 million) equity capital from IFC, a member of the World Bank Group, as part of its two-tiered fifth round of funding, according to a company statement. Existing investor FMO (Netherlands Development Finance Company or Nederlandse Financierings-Maatschappij voor Ontwikkelingslanden N.V.) has also invested an additional Rs 2.28 crore ($0.42 million) to its earlier investment of Rs 32.6 crore ($6.52 million).

In January, Ujjivan raised Rs 127.9 crore ($25.5 million) in its fifth round first tranche of equity funding. With this second tranche, the total equity investment of Rs 175.18 crore is one of the highest raised by any MFI in India this year.

Ujjivan’s existing investors who participated in the fifth round of funding include Lok Capital, India Financial Inclusion Fund (Caspian Advisors), Sequoia Capital, Unitus Corporation and Elevar Equity.

Ujjivan’s managing director Samit Ghosh told VCCircle that the firm is targeting fresh lending of Rs 300 crore for the current financial year. “This will be the last of the equity infusion for 2012-13, but we are always in talks with the banks. We have enough liquidity to take care of the loan growth,” he said.

The MFI’s current outstanding loan book stands at Rs 775 crore.

The company has opened five branches this year and plans to open 18 more before the end of this fiscal.

“Since the microfinance crisis, IFC has been focused on investment and advisory services targeted at helping the microfinance sector expand its outreach to low-income households in India,” said Thomas Davenport, director for IFC, South Asia. “We will work with Ujjivan, an institution that promotes responsible financing, for a more balanced growth of microfinance in India.”

With its capitalisation increasing to Rs 275 crore, Ujjivan’s CFO Sudha Suresh indicated that the additional equity would comfortably ensure its regulatory capital adequacy requirements over the next 3-5 year horizon and enable excellent leverage for business growth.

“Since investing earlier this year, FMO has been confirmed in its conviction that Ujjivan would add improved operational efficiencies to its key strength of providing financial services to India’s economically active urban poor,” said Keesjan de Kruijf, senior investment officer, FMO.

Ujjivan serves over a million clients in 20 states including in 48 under-banked districts across the country. It does not have a presence in Andhra Pradesh, a state in southern India which has proved to be a hot potato for the MFI sector with fresh regulatory clamps.

Churn in investor base

The fresh round of funding has also seen a churn among existing investors where two of the existing investors, Bellwether and Michael & Susan Dell Foundation (MSDF), have exited Ujjivan. Bellwether, a fund that invests in startups and mid-sized Indian microfinance institutions, sold its stake to Lok Group, another existing investor that has become the third largest shareholder in the MFI. MSDF sold its stake in the company to Women’s World Banking (WWB).

Post the completion of the second tranche of funding, Unitus’ stake in Ujjivan has shrunk to 15.87 per cent from 18.16 per cent although it still remains the single largest shareholder. VC firm Sequoia Capital’s stake has come down to 14.53 per cent from 16.63 per cent; Lok Group’s holding has increased to 13.07 per cent (pursuant to stake purchase) and IFC holds around 12 per cent with its fresh investment, among the top four shareholders.

Caspian Advisors, which holds stake in the MFI through India Financial Inclusion Fund, has seen its holding shrink to 8.99 per cent; Wolfensohn Capital Partners’ stake has come down to 10.7 per cent from 12.25 per cent and FMO’s holding has inched up from 9.98 per cent to 9.33 per cent with the additional investment in the second tranche.

The latest deal gives post-money valuation of around Rs 350-375 crore to Ujjivan, as per VCCircle estimates.

Investors who participated in the first tranche of the fifth round of equity funding include Lok Capital, Sequoia Capital, Unitus, Elevar Equity, India Financial Inclusion Fund (Caspian Advisors), Wolfensohn Capital and FMO (which has also participated in the second tranche).

(Edited by Sanghamitra Mandal)

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