Exclusive: NBFC Capital First to raise $50m from IFC through NCDs

Capital First Ltd (CFL), a Mumbai-based non-banking finance company (NBFC), will be raising around Rs 340 crore ($52.6 million) from International Finance Corporation (IFC).

In the process, IFC will subscribe to a 5-year secured non-convertible debentures (NCDs) for the equal amount of investment which is a part of IFC’s strategic target to reach 10 million MSMEs during FY17-21.

Capital First will use the proceeds for financing the growth of CFL’s lending portfolio to women-owned small and medium enterprises, IFC said in a disclosure.

This is the second debt investment by IFC in the company. It had earlier provided a debt of Rs 350 crore ($54.1 million) which was completed in 2016.

CFL, founded by V. Vaidyanathan, specialises in MSME and consumer financing supported by proprietary credit evaluation methodologies and strong credit scoring platform. With 48 offices in the country, the company offers SME loans, loan against property, home loans, two wheeler loans and durable loans.

It has provided a loan of Rs 18,800 crore ($2.9 billion) as of December 31, 2016, including 91 per cent of MSME and consumer financing. CFL has financed over 3.5 million customers till date.

PE giant Warburg Pincus is the major shareholder of the company which is reportedly looking to sell its 10 per cent stake. As of December 31, 2016, Warburg Pincus held 61.1 per cent stake in the company.

Other shareholders in the NBFC include Goldman Sachs Asset Management, GIC, HDFC Standard Life, Government Pension Fund Global (Norges Bank Investment Management), Birla Asset Management, Ashburton, Ashmore and other leading global and domestic institutional investors.

Last November, CFL had raised Rs 340 crore ($50.9 million then) from Caladium Investment Pvt Ltd, an affiliate of Singapore’s sovereign wealth fund GIC.

Most recently, NBFC Au Financiers converted itself to Small Finance Bank and rechristened as AU Small Finance Bank.

IFC and CFL are also discussing a potential IFC advisory services project, which would help CFL strengthen its value proposition and business case for women entrepreneurs, the companies said on Friday.

Shares of Capital First last traded at Rs 770.70 each, down 1.08 per cent on BSE in a weak Mumbai market on Friday.

For IFC – the private lending arm of the World Bank Group – this is the second investment in thie month. Last week, it announced to provide a $100 million A loan to Federal Bank Ltd (FBL), a nationalised Indian bank.

Besides India, IFC has proposed to invest in several Southeast Asia companies. Some of these include $205 million to China’s Kingenta Ecological Engineering Group Co Ltd, $35 million debt to Indonesia’s Indosurya Inti Finance, $100 million loan to Federal Bank, upto $20 million debt to hospitality firms in Bangladesh and Nepal, $15 million to Myanmar’s Shwe Taung Cement project, and $25 million to LeapFrog Fund III.

According to an ASSOCAM report, NBFCs have scripted a great success story. Their contribution to the economy has grown in leaps and bounds from 8.4 per cent in 2006 to above 14 per cent in March 2015. In terms of financial assets, NBFCs have recorded a healthy growth—a compound annual growth rate (CAGR) of 19 per cent over the past few years—comprising 13 per cent of the total credit and expected to reach nearly 18 per cent by 2018–19.

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