Mumbai: Financial services firm IIFL Holdings Ltd on Wednesday said CDC Group Plc, the development finance institution owned by the UK government, will invest about ₹ 1,000 crore in its unit India Infoline Finance Ltd (IIFL Finance).
CDC’s investment will help the IIFL Group expand its financing business and address the capital needs of under-served segments, it said in a release.
“CDC was the first private equity investor in IIFL during our start-up phase in 1999. We are excited to have them back as a partner. IIFL’s strategy of focussing on small ticket retail credit to under-served geographies and segments resonates with CDC’s investment objectives," said Nirmal Jain, founder of IIFL Group.
The proposed investment is by way of compulsorily convertible preference shares which on conversion will result in about 15% equity stake for CDC in IIFL Finance on a fully diluted basis. The proposed transaction is subject to necessary regulatory approvals.
IIFL Finance is a non-banking financial company (NBFC) which is engaged in the business of offering home and property loans, gold loans, commercial vehicle finance, healthcare finance, loan against securities and small and medium enterprise (SME) business loans.
For the year ended 31 March, IIFL Finance’s loan book stood at ₹ 17,770 crore and net profit was ₹ 340 crore.
“The investment of new capital in IIFL Finance that we are announcing today will help IIFL Finance grow further, with a particular focus on affordable housing and micro- and SME financing," said Srinivasan Nagarajan, head-South Asia for CDC.
“CDC’s ability to provide long-term capital means that we can provide IIFL Finance with the patient backing it needs to reach even more customers in under-served sectors and regions of India," Nagarajan added.
The investment banking arm of IIFL Group was the exclusive financial adviser to IIFL Finance in this transaction.
In July 2015, billionaire investor Prem Watsa increased his stake in the holding company, IIFL Holdings Ltd, by investing ₹ 1,621 crore. In addition, IIFL Wealth Management Ltd raised ₹ 1,122.34 crore by selling a 21.61% stake to global private equity fund General Atlantic Singapore Fund Pte. Ltd.
R. Venkataraman, managing director and co-promoter of IIFL Group, said the company is betting on the NBFC and wealth management businesses to drive growth.
At present, pure lending income makes up nearly 70% of the revenue for the firm and on the NBFC part, its capital adequacy is roughly around 17%.