This is the second investment in a round where Eight Roads Ventures previously invested $25 million, as reported by ET last month. Standard Chartered PE has already transferred $17 million to the company and the remaining amount will be infused in tranches over the next few quarters.
Through the $25 million that Eight Roads invested in the company in November, the proprietary investment arm of Fidelity International had entered the area of financial services.
With this new infusion by Standard Chartered PE, the amount raised by the company in external funding would total $104 million. Chennai-based IFMR Capital, which works in the area of microfinance, affordable housing loans and banking, will use the money to further expand its existing business, enter new sectors and increase focus on product development.
“The emphasis would be to expand our portfolio across sectors, go deeper in existing sectors and get onboard more number of originators in these sectors. The additional capital will give us the ability to work with a larger number of originators in our existing sectors. We also have a renewed emphasis on product development,” chief executive Kshama Fernandes told ET.
The company is scouting for new sectors where there are opportunities to deal with underbanked businesses and individuals.
“What attracted us to IFMR Capital is the fact that it is a very scalable model. Less than 10% of the Indian population has access to credit and this business is really focussed on financial inclusion, which offers a huge opportunity,” said Udai Dhawan, country head-India at Standard Chartered Private Equity.Dhawan said with IFMR Capital putting its own skin into the game, the question of credibility is answered.
“What that really does is provide a de facto credit rating to the end market investors.” The structure of the deal is equity based with the PE coming in as a minority shareholder. Dhawan will join the board.
The transaction also involves a further partial exit for IFMR Capital’s primary investor,LeapFrog Investments, which had invested $29 million in 2014. LeapFrog’s shareholding in the company has reduced to 28% from the 34.5% it held earlier. The PE firm declined to comment on its return from the investment, but said it is in no hurry to exit IFMR Capital completely.
“A part of the dilution (of stake) was to create space for other investors to come in. They still have growth potential for capital. Their underlying sectors are growing rapidly and they are able to add new sectors,” Michael Fernandes, a partner at Leapfrog, told ET.
IFMR Capital has disbursed loans worth Rs 37,000 crore since its inception in 2008 and Kshama Fernandes, the CEO, said the growth strategy revolves around building a robust and diversified portfolio across sectors, entities, and geographies. “I think our emphasis over the next one-and-half to two years would be to ensure that the capital that we’ve raised is put to the best use possible,” said Fernandes.