Chennai-based non-banking financial company (NBFC) IFMR Capital has entered into a partnership with Japanese bank Sumitomo Mitsui Banking Corporation (SMBC) to facilitate investments in India’s priority sector, a senior executive of the firm said.
IFMR Capital, which was established in 2008, connects NBFCs working among financially excluded households and businesses such as micro lenders, affordable housing financiers, lenders to small businesses, agricultural finance firms and vehicle financiers, with investors in existing and emerging debt capital markets.
IFMR Capital has raised over Rs40,000 crore for its clients to date.
The parties have signed a memorandum of understanding (MoU) under which SMBC would utilize IFMR Capital’s relationships, product structuring capability, risk management and credit underwriting processes in acquiring priority sector assets in the country.
“This partnership is of strategic importance to both organizations as we expand our footprint in promoting financial inclusion globally. We believe this will be a harbinger of increased interest from other investors in the APAC region,” said Kshama Fernandes, managing director and chief executive officer of IFMR Capital.
The partnership will help SMBC leverage IFMR’s expertise in the financial inclusion space to build its priority sector book.
“As a bank, they have to meet requirements for PSL (priority sector lending). A large part of their book is currently institutional or wholesale in nature,” said Fernandes, adding that SMBC will be able to leverage on IFMR’s understanding and the last mile reach in priority sectors.
“IFMR has the ability to evaluate credit at the last mile and help them access this credit across asset classes, whether it is in the shape of term loans or bonds,” she added.
The partnership will play a key role in developing interest among Japanese and other investors from the Asia Pacific region in financially excluded sectors in India.
Currently, SMBC operates through its sole branch in New Delhi. The Japanese bank is set to open its second branch in Mumbai soon.
SMBC is engaged in leasing, securities, credit card, investment, mortgage securitization, venture capital and other credit related businesses. The Sumitomo Mitsui Financial Group is one of Japan’s largest banks with total assets of around $1.8 trillion, employing 30,000 people in 500-plus branches across the world.
IFMR Capital, in recent months, has raised capital commitments of $75 million from private equity investors.
In December, it announced that Standard Chartered Private Equity has made an investment of $17 million and will increase it further to total $50 million.
Earlier in November, the company had raised $25 million from Eight Roads Ventures, the proprietary investment arm of Fidelity International Ltd.