The proceeds of the loan will be used by Ess Kay towards the purchase and conversion of gasoline or diesel cars into compressed natural gas (CNG) vehicles, FMO said in its investment proposal.
Founded in 1994 by Rajendra Setia, Ess Kay Fincorp provides vehicle finance and SME finance in rural and semi-urban India. It also helps in the purchase of used commercial vehicles, tractors, cars and two-wheelers, as well as provides business loans to SMEs.
The company currently has a network of 250 branches spread across the states of Rajasthan, Gujarat, Punjab, Haryana, Madhya Pradesh, and Maharashtra, according to its website.
In November last year, Ess Kay raised $42 million in a funding round led by TPG Growth, a middle-market and growth investment fund. The funding followed a $32-million equity investment from US-based Norwest, Baring Private Equity India, and Evolvence India.
The proposed deal, FMO said, is aligned with its strategic priorities in India: green lines and strong innovative NBFCs that are reducing inequalities.
“Pollution is a severe problem in Indian cities. By contributing to the growth of Ess Kay’s CNG portfolio, we are promoting cleaner technologies and help to improve the air quality,” the Dutch lender said.
Additionally, FMO noted that Ess Kay targets first-time borrowers and entrepreneurs setting up a business, which is aligned with the Dutch lender’s mission to reach underserved micro-entrepreneurs and encourage the progression from informal to formal sectors to build up a credit history.
The proposed loan comes as FMO expects its investment in India to hit 1 billion euros ($1.1 billion) in the next four years, according to a Mint report. India is FMO’s biggest investment destination.
Its recent deals in India include an $18.2-million investment in financial services firm Aye Finance and an $85.7-million funding in InCred, an NBFC founded by former Deutsche Bank senior executive Bhupinder Singh.
It has also proposed an $8.3-million investment in Sahyadri Farmers Producer Co, a farmer organisation with 7,000 members, and another $15 million in the latest fund of India-based venture capital and private equity firm BanyanTree.
Founded in 1970, FMO manages a portfolio worth 9.7 billion euros ($11 billion) spanning over 85 countries, of which 2.5 billion euros ($2.8 billion) is invested in the Asia region. FMO’s average ticket size for investment is 15 million euros ($16.7 million) and it invests across equity and debt.