IFC to invest up to $150 million in Bajaj Finance via NCDs
World Bank’s IFC will buy Bajaj Finance’s secured, fixed, rated and listed NCDs, proceeds of which will be used to give out loans to MSMEs
Mumbai: International Finance Corporation (IFC), the private lending arm of the World Bank, is looking to invest up to $150 million in non-banking financial company Bajaj Finance Ltd, according to a disclosure by IFC.
IFC will buy Bajaj Finance’s secured, fixed, rated and listed non-convertible debentures (NCDs); the proceeds of the fundraising will be used to lend to micro small and medium enterprises (MSME).
The investment will support Bajaj Finance’s funding base diversification and requirement for long-term funding, IFC said in the disclosure. IFC will also support the company in the establishment of environmental and social practices for the asset class.
“The proposed investment would increase availability of financing to the MSME segment which lacks adequate access to finance despite being a key driver of the Indian economy. Within the SME space, the transaction also intends to reach low-income states and women-owned SMEs,” it said.
Recently, IFC said it would invest up to $100 million in Fullerton India Credit Co. and around $50 million in Capital First.
These proposals are part of IFC’s strategic target to finance 10 million MSMEs during financial year 2017-21.
Bajaj Finance operates across different business segments including consumer, SME, commercial and rural. Currently, it has a network of 304 branches, 497 rural locations and over 33,700 distribution points.
As on December 2016, the Pune-based consumer and enterprise financing company reported total assets of nearly $9.23 billion. Of this nearly 43% are under consumer financing and 42% under SME financing.
Commercial business accounts for 12% of the loan and the balance 3% comes from the rural sector.
In July last year, Bajaj Finance had raised Rs490 crore by selling non-convertible debentures on a private placement basis. Bajaj Finserv, which owns an equity stake of about 57.3% in Bajaj Finance, is the holding company for the businesses dealing with the financial services of Bajaj Group. The group is engaged in automobile manufacturing and financial services.
IFC has an active direct private equity-style investment practice, apart from lending to firms in India. It also has an active limited partner, portfolio in India where it backs PE and venture capital funds focused on India.
Last week, IFC said it is planning to invest as much as $40 million in housing finance firm Aavas Financiers Ltd.