L&T Finance acquires 26% stake in Grameen Capital India

L&T Finance Ltd has acquired a 26% stake in Grameen Capital India, which focuses on providing capital market access to social enterprises, the latter said in a press statement on Tuesday.

Grameen did not disclose the amount invested by L&T Finance for acquiring the stake.

L&T Finance, a non-banking finance company (NBFC), is a wholly-owned subsidiary of L&T Finance Holdings Ltd.

Grameen Capital India, which has been focusing on the impact advisory space for the past seven years and has helped raise over $150 million in equity and debt capital for social enterprises, is now planning to launch an NBFC to lend to social enterprises.

“The vision of Grameen Capital is to create a ‘capital with a conscience ecosystem’, which means double bottom-line impact investing, creating the right climate for it,” said Royston Braganza, chief executive officer at Grameen Capital.

The NBFC, with an equity base of $10 million, will lend directly as well as use its balance sheet to syndicate and create larger debt products for the impact sector.

The NBFC is expected to start lending in a few weeks, Braganza said.

To start with, the debt arm of Grameen Capital will focus on financial inclusion, affordable health, affordable education and agriculture sectors.

“There is a big gap in debt-financing for social enterprises, forcing them to dilute equity for working capital financing, which is not optimal commercially. Without debt it will be difficult for such organizations to scale up,” Braganza said, adding that micro, small and medium enterprises debt lending in India is a $200 billion market.

“The L&T group has always worked actively and consistently in promoting inclusive development, well before it became fashionable. Social enterprises need to build a sustainable scale with the help of patient capital,” said Y.M. Deosthalee, chairman and managing director of L&T Finance Holdings.

Apart from L&T Finance, Grameen Capital’s shareholders include Ratan Tata, chairman emeritus of Tata Sons; Shrinivas Dempo, chairman of the Dempo Group; Vikram Gandhi, founder and chief executive of VSG Capital Advisors; the Patni brothers and Citicorp Finance (India) Ltd.

In March, Grameen had raised funds from Tata and others to fund its NBFC initiative.

According to Braganza, a portion of L&T Finance’s investment will go towards funding the NBFC and the rest towards funding the broader ecosystem.