Mumbai: Standard Chartered Private Equity (SCPE) has made an investment of $17 million in IFMR Capital and will increase it further to total $50 million, executives from both companies said. IFMR is a financial services firm that helps financial institutions serving under-banked people raise funds.
The latest fundraising by IFMR Capital follows a $25 million investment in November by Eight Roads Ventures, the proprietary investment arm of Fidelity International Ltd.
Earlier in March 2014, the company had raised $29 million from impact investment fund Leapfrog Investments. Leapfrog has made a partial exit through the latest round of funding.
IFMR Capital connects non-banking financial companies (NBFCs) working among financially excluded households and businesses such as micro lenders, affordable housing financiers, lenders to small businesses, agricultural finance companies and vehicle financiers, with investors in existing and emerging debt capital markets.
IFMR Capital was established in 2008.
According to Udai Dhawan, managing director and country head, India at SCPE, the large opportunity in the financial inclusion space and the business model of IFMR Capital, attracted the private equity fund.
“They (IFMR Capital) have a differentiated business model, which offers a very strong value proposition to both the originators (NBFCs, MFI etc.) as well as the investors which invest in these companies through instruments arranged by IFMR Capital. It is not only providing credit solutions to lenders, but they are also putting their own capital on the line, which is a unique business model,” said Dhawan.
The model is also highly scalable given that only less than 10% of the population has access to formal credit, he said.
“There is a huge opportunity in the financial inclusion theme, not just in India but across various markets. We have invested in Vietnam in a mobile wallet and payments company, they also offer branchless banking to people who do not have access to formal credit, have invested in peer-to-peer lending company in China,” Dhawan said.
IFMR Capital plans to use the funds for product innovation and to increase its client base and sectors that it caters to.
“We work with over a hundred clients, but there are several more institutions out there who face challenges in accessing capital markets. We want to reach out to many more such originators. And we want to intervene in the capital markets in a much more ambitious manner,” said Kshama Fernandes, managing director and chief executive at IFMR Capital, adding that the company will focus on new product development and deeper penetration in existing sectors.
IFMR Capital is also looking to engage with new clients in sectors such as fintech and education finance, she said.
Fernandes added that IFMR Capital has raised significant amounts of capital from private equity investors, because the company, apart from being an arranger of access to capital, is also an investor.
“We need the capital because we are primarily investors in the space. While we do a lot of structured finance, our role goes beyond being the structurer, arranger and the syndicator and has primarily been that of an investor. That premise will continue going forward,” she said.
The company ended 2015-16 with a profit of almost Rs60 crore on revenue of Rs246 crore.
Since inception, IFMR Capital has enabled over 100 financial institutions, or originators, to raise debt from the capital market. It has facilitated debt financing of more than Rs35,000 crore to its originators.
IFMR Capital has also launched three domestic alternative investment funds offering mid to long-term debt funding to these originators.
IFMR Capital currently employs about 110 people and has offices in Chennai, Mumbai, Gurgaon and Bangalore.