International Finance Corporation, which has development among its key objectives, has found a partner in India’s non-banking finance companies (NBFCs) even though the India’s banking regulator Reserve Bank of India still classifies them under the so-called `shadow banking’ tag.
New generation NBFCs such as Capital First and Fullerton India Credit Company have just received commitment from IFC for $50 million and $100 million respectively as they were exploring the more liquid offshore bond market for raising resources.
Offshore capital is cheaper than bank loans.
Singapore’s Temasek Holdings-owned Fullerton India is looking to privately place $100 million Masala Bonds with IFC, while Warburg Pincus-backed Capital First is looking to raise $50 million in five-year non-convertible debentures, IFC said in its disclosures.
The private equity arm of World Bank said that Fullerton’s mass market customer segments fits well with its funding mission of uplifting the economically backwards. It has also mentioned in a separate disclosure that the funding for Capital First will be used for lending to women-owned small and medium enterprises.
These investments are part of IFC’s strategic target to reach 10 million MSMEs during FY17-21.
This will be the second such rupee-denominated offshore bond issue for Fullerton India, which lends to rural and urban micro and small enterprises and finances commercial vehicles, two-wheelers, and affordable housing. It had raised Rs 500 crore in October last year in Masala Bonds through a private placement to Swiss bank Credit Suisse.
“We are in advanced stage of discussions with IFC. The terms and conditions are being finalised. We will exercise this choice when time is right,” Natarajan said. The bonds will be raised for three to five years.
Temasek 100% own Fullerton India through its step down subsidiary Fullerton Financial Holdings Pte.
For Capital First, the proposed NCD is the second IFC’s debt investment in it, which is 61% owned by private equity firm Warburg Pincus through its affiliated funds. Last year, IFC had invested $52.5 million in the NBFC led by V Vaidyanathan.
Capital First has a loan book of Rs 18,800 crore as of December 31, 2016, of which 91% consists of MSME and consumer financing. It has financed 35 lakh customers so far.
Fullerton with Rs 13000 crore as outstanding loans as on March 31, looks to grow its business 15-18% this fiscal. It has built a network of 530 branches and serves over 16 lakh customers.
