MUFG invests additional $334 million in DMI Finance

Mumbai: Japanese banking giant Mitsubishi UFG Financial Group (MUFG) has infused an additional ₹2,798 crore ($334 million) in digital lending company DMI Finance Pvt. Ltd, a sign of growing investor interest from Asia's second largest economy.

"India is a large market where rapid economic growth is expected, wherein the accelerated development of digital financial services is also foreseen due to the spread of the internet and various policies promoting digitalization," said MUFG in its statement. This strategic investment in a major player in India’s digital financial services industry aims to further capture growth in the area, it said.

MUFG valued DMI Finance at $3 billion, becoming the digital lender's second largest shareholder after DMI Limited, Mauritius.

The investment, made through its consolidated subsidiary MUFG Bank, takes the total money the Japanese group has ploughed into DMI Finance to ₹4,712 crore (approximately $565 million), adding to the $400 million injected last April.

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"We expect a lot of synergies not just in India, but in their portfolio of companies. We are working with them and portfolio of companies across Southeast Asia for expansion, and products and services," said Shivashish Chatterjee, co-founder of the DMI Group. "We are looking for patient capital that will help us build a book of ₹50,000 crore over the next 5-7 years."

Delhi-based DMI Finance is a digital-led non-banking finance company that offers loans to individuals and small businesses. It had disbursed more than ₹18,000 crore in loans during FY24.

According to Chatterjee, DMI Finance plans to use the capital to expand its balance sheet. It aims to boost its lending to small and medium enterprises to 25% of total loans from the current 10% over the next 12-18 months. DMI Finance is also open to looking at acquisitions, he said.

"We are looking to increase our MSME portfolio as there is a structural need for greater credit to MSMEs. In consumer loans, our growth in FY2025 is slower than it was in FY2024, which is consistent with a period of retrenchment as we are past the peak for consumer credit in this cycle,” said Chatterjee. “This is a cyclical episode which is necessary as it helps to take the froth out of the market."

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Over the last one year, DMI Finance acquired payments firm Oxymoney, operated by Appnit Technologies Pvt. Ltd, and ZestMoney platform.

According to ICRA ratings, the DMI Group was initially engaged in secured corporate lending, largely to real estate builders. However, it shifted its focus to small-ticket individual and affordable housing loans. As on 31 March 2024, the group’s overall loan book, including DMI Finance and DMI Housing Finance, stood at ₹14,550 crore, with retail consumer lending accounting for 84%, affordable housing finance loans for 12% and wholesale loans for the remaining 4%.

In FY24, DMI Finance reported a net profit of ₹417 crore compared with ₹320 crore in FY23. Capital adequacy stood at 44.8% as on 31 March 2024 as against 50.9% a year earlier.

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