Mumbai: Mumbai-based IntelleGrow, a venture debt-financing company for small and medium enterprises (SMEs), has raised Rs10 crore from the Michael and Susan Dell Foundation (MSDF).
IntelleGrow, promoted by investment banking services and advisory firm Intellectual Capital Advisory Services Pvt. Ltd (Intellecap) and supported by the Shell Foundation, has disbursed 20 loans totalling Rs15 crore to SMEs across India in areas such as wastewater recycling, clean-energy solutions, low-cost irrigation, rural healthcare, rural electrification and non-credit financial inclusion.
IntelleGrow provides viability-based debt financing to early-stage enterprises with a turnover of less than Rs50 crore and a track record of at least 12 months. It provides customized financing solutions using flexible repayment schedules linked to the company’s cash flows.
“Businesses in their early stages need debt at the right time to sustain and create value. Our offering in the form of venture debt creates value for promoters and investors and helps multiply the social impact,” said Sanjib Jha, chief executive, IntelleGrow, adding that the plan is to build a Rs250 crore portfolio by 2015.
According to a 2012 report by International Finance Corp. (IFC) and Intellecap, one of the biggest challenges faced by the SME sector is the availability of adequate and timely finance. Despite the key economic role SMEs play, including a contribution of almost 22% to the gross domestic product (GDP) of India, over 37% of the overall debt demand from SMEs cannot be serviced by existing financial institutions. Most lenders typically engage in traditional collateral-based lending to enterprises operating in established industries and require at least three years of profitable track record.
“By making appropriate debt financing accessible, IntelleGrow will be addressing a very critical gap that exists today for many start-ups to obtain the capital necessary for fuelling growth and achieving scale,” said Debasish Mitter, country director, India, at the Michael and Susan Dell Foundation.
IntelleGrow’s Jha said while it mostly offers non-collateralized venture debt on the basis of the viability and vision of a business, scalability and cash-flow, this form of lending has emerged as a viable over the last 18 months and “there has not been a single default”, he said, adding that it charges interest rates of 16-18%, compared with 26-32% charged by other non-banking finance companies.