International Finance Corporation plans to invest a total of up to $450 million via debt in Indian non-bank lenders Cholamandalam Investments & Finance Company Ltd and Manappuram Finance Ltd.
IFC, the private-sector investment arm of the World Bank Group, has proposed to provide up to $150 million to Cholamandalam through a three-year US dollar-denominated senior secured loan. It will also mobilize up to $200 million from other lenders for the company, with an unspecified amount in a greenshoe option.
Separately, IFC plans to provide a senior secured loan of up to $100 million in equivalent rupee through subscription to non-convertible debentures to Manappuram for a tenor of up to three years.
IFC said in a disclosure the proposed investment in Cholamandalam will support vehicle financing for micro, small and medium enterprises (MSMEs), with a focus on the low-income states (LIS) and rural regions of India.
IFC said the Covid-19 pandemic has aggravated the already weak economic environment for MSMEs since they are less resilient to exogenous shocks. This proposed investment is part of IFC’s approach in India where it will work with different financial institutions to support the recovery of MSMEs from the Covid-19 pandemic and stimulate growth.
Chennai-based Cholamandalam is one of the leading asset financing NBFCs in India with assets under management of $9.98 billion as on March 31. It has a strong distribution network that caters to over 1.87 million customers through 1,145 branches across India. The company primarily lends to MSME clients in the transportation sector that are economically weak, have limited credit history and therefore are unable to raise funds from commercial banks.
Mumbai-listed Cholamandalam has a market capitalization of about $7.1 billion. The promoter and promoter group hold 52% of the company’s shares while foreign institutional investors hold 18% and mutual funds own 21%. The remaining stake is held by public shareholders and others.
Meanwhile, IFC’s loan to Manappuram will help the company support underserved individuals with a focus on directing a portion of the debt towards women borrowers.
Manappuram primarily offers gold loans. The company was founded by VC Padmanabhan, father of current MD and CEO VP Nandakumar, in 1992 in Kerala. As on March, it has consolidated assets under management of about $3.9 billion and a workforce of over 40,000.
Nandakumar controls 34.5% of the company. Private equity firm Apax Partners owns 9.9% while Baring India Private Equity holds 3.2%. The balance stake is held by foreign institutional investors, public shareholders and mutual funds.
The Thrissur, Kerala-based company has 5,000 branches across 29 states in India on consolidated basis.