Microfinance companies may be hit by nonrepayment of loans following demonetisation and loan waiver rumours, but investors are keeping their faith alive.
International Finance Corporation, the investment arm of World Bank, is about to invest Rs 135 crore debt in Grameen Koota Financial Services, while Morgan Stanley expects Bharat Financial Inclusion to outperform over a one-year period.
The renewed trust by these marquee investors is expected to provide more comfort to local lenders who finance MFIs for on-lending.
IFC’s investment is likely to be completed in a week’s time, Grameen Koota Managing Director Udaya Kumar told ET.
“IFC partnering us is a very important development. This is positive for the entire sector,” Kumar said. IFC will subscribe to non-convertible debentures issued by the MFI for five years.
“This investment will promote a more balanced growth of microfinance in India. Grameen Koota’s operations are expanding in western and central India where MFI penetration has historically been low,” IFC had said in a disclosure issued May 16, last year.
The Bengaluru-based MFI had also received Rs 250 crore of fresh capital in the last week of March from its holding company CreditAccess Asia, an Amsterdam-based Asian microfinance player.
On Monday, local brokerage firm Indianivesh Capital announced Rs 25.7 crore investment in Maharashtra-based microlender M Power Micro Finance. This will be followed up by another Rs 10 crore infusion in the next one year, Indianivesh said, showing faith on the sector.
Meanwhile, Morgan Stanley, which is the largest shareholder in Bharat Financial with a 6.74% stake, backed the MFI despite Rs 235-crore fourth quarter loss.
“It is a pure microfinance play with a robust model and has reported significantly better asset quality trends than the industry following demonetization,” Morgan Stanley said in a research report.
“The stock could come under pressure in the near term – but we expect outperformance over a one-year period as normalcy returns and growth picks up,” it said.
