With Ballarpur deal, IFC's investments near $1 billion this year

With an investment of $250 million in Ballarpur Industries Ltd and another $27.5 million in Lucid Colloids Ltd, both announced on Wednesday, the International Finance Corporation (IFC) has pushed its investments in India in 2014 to close to $1 billion.

Papermaker Ballarpur Industries is the flagship of the $4 billion Avantha Group. Lucid Colloids produces guar gum widely used in various industrial processes.

IFC, a part of the World Bank group, has invested $900 million in India so far this year spread across 18 deals. The investments have already exceeded the $820 million committed in 2013.

“As an active investor in India, IFC evaluates all key opportunities in line with our strategy. Investments are a function of finding the right opportunities, and where IFC can play an important development role with appropriate impact and financial returns. We have been and continue to be long term investors in India,” said Nupur Garg, regional lead, private equity funds, IFC.

India is the biggest investment destination for IFC. Its India portfolio stood at $4.5 billion at the end of 30 June, 2013, as per IFC’s website.

While recent deals concluded by IFC have been spread across sectors, there has been a focus on deals in areas of renewable energy and microfinance. IFC invested around $255 million in microfinance companies and non-banking finance companies (NBFC) such as Bandhan, Cholamandalam Investment and Finance, Punjab National Bank Housing Finance Ltd, Janalaxmi Financial Services, Vistaar Financial Services, Magma Fincorp Ltd and Au Financiers Ltd so far this year.

This adds to the $120 million invested in the sector in 2013 when IFC invested in companies like Dewan Housing Finance Corporation Ltd, Equitas Microfinance, Ujjivan Financial Services, Suryoday Microfinance and IFMR Rural Channel and Services.

“IFC’s strategic priorities in India revolve around infrastructure building, promoting clean and sustainable private sector growth, financial inclusion and enhancing access to affordable and quality healthcare,” said Garg.

Another significant area for investment has been renewable energy. In 2014, IFC has invested around $64 million in two deals in the renewable energy space; in 2013, it made an investment of $73 million across three deals in the sector. “Renewable energy has always been a strategic pillar for IFC, but apart from that we are sector agnostic,” said Garg.

Investments in the renewable energy space by global funds have been increasing year over year, according to Kameswara Rao, leader, energy and utilities at PwC India, a consultancy.

“The inflow has been improving since two to three years ago. This has come from global financial markets via bond raise and equity investment, from funds such as ADB, IFC, Goldman Sachs, Morgan Stanley, etc., and from power utilities. These collectively are substantial investments in the renewable energy sector and are structured at fairly good returns,” said Rao.

Rao further explained that investor appetite for renewable energy has increased as the gap between the cost of conventional energy and the cost of renewable energy has diminished dramatically, making the sector more attractive. Hyderabad-based GreenKo Group raised $550 million in July via overseas bonds, highlighting the increased interest in India’s renewable energy sector.

IFC has also made some exits. It sold its 5% stake in Suguna Foods Ltd to the promoters in June this year for approximately ₹ 150 crore, according a 27 June article by VC Circle. IFC had invested $29 million in 2006 in a part equity part debt deal.

It has partially divested its stake in Cholamadalam Investment and Finance, an NBFC. In August, it sold a 2% stake in Cholamandalam Investment for a sum of ₹ 121 crore. Snowman Logistics Ltd, a company IFC has invested in, is also due to be listed on bourses next week.

The company’s recently concluded initial public offering (IPO) was subscribed 60 times.

IFC holds 12.46% stake in the company but declined to comment on whether they are exiting the company as part of the IPO.