IFMR Capital to raise Rs 4,000 cr for financially excluded markets
Mar 31 2014
Demand for financial springboards and safety nets is growing fast
The second round of funding would also help the company add one new sector every year, in a business model where it arranges finance for onward lending.
“We would like to make a deeper impact on the sectors we already serve and also keep adding one new sector every year, as there is tremendous potential to reach out to the originator companies that lack access to finance where we could provide efficient capital,” Kshama Fernandes, chief executive officer of IFMR told Financial Chronicle.
IFMR Capital, provides credit, insurance and other financial services to financially under-served households and businesses. Right now, it works with companies in sectors like microfinance, small businesses, affordable housing and commercial vehicle financiers. This year, it is actively looking at agri-financing as a potential sector to be added to the kitty.
“We typically do 10 per cent of a total transaction for a company, while the 90 per cent would come from a senior tranche. Our real value comes in as a subordinate investor. Other large investors would not invest in such organisations but because we do the ground work and risk monitoring they open up to investing in originator companies. Very rarely we do an investment alone,” she said.
Around 80 per cent of their finance services like securitisation, syndication, NCDs, commercial papers are towards the microfinance sector and the rest across all other sectors they are present in. But going forward, the Chennai-based company hopes with the addition of newer sectors, MFIs can contribute 50 per cent, as the other sectors would also grab attention.
Estimates say there are 30 million micro, small and mid-sized enterprises in the country, only 5-10 per cent of have access to formal sources of funding. And, the market for financing such enterprises is expected to grow from $1.5 billion to $ 6.35billion by 2020.
LeapFrog’s investment comes five years after the IFMR Trust had initially invested Rs 60 crore in the company. The second round of investment, according to Fernandes, may help them continue with growth for the next three years.
“The demand for financial springboards and safety nets in India is growing fast, on a very large scale and IFMR Capital recognised this need early. In a short time, they have built a high road between the capital markets and the institutions and India’s emerging middle class,” said Jim Roth, co-founder, LeapFrog Investments in a statement announcing their $29 million investment in the company.