Dutch development bank FMO expects its investments in India, its biggest investment destination, to touch Euro 1 billion in the next four years, said a senior executive in an interaction with Mint.
The Netherlands-based development, a growth stage investor in private sector firms in developing countries, focuses on sustainable economic and social development. Founded in 1970, it manages a portfolio worth 9.7 billion euros spanning over 85 countries, of which 2.5 billion euros is invested in the Asia region. FMO’s average ticket size for investment is €15 million and it invests across equity and debt.
“At the present growth rate 8%, our India portfolio could reach 1 billion euros in the next four years, subject to us finding quality investments. Our investments will also be aligned to our strategy, sufficient risk mitigation, country limit and regulatory possibilities,” said Peter Van Mierlo, chief executive officer of Dutch Development Bank FMO.
“As a bank, we diversify our book and work with country limits based on investments and risk exposures. But, our investments could rise in India because of its size of India and growth potential. Even though our India allocation will never go beyond 10% of our balance sheet, it will rise as we are presently at 7% and there’s still room in terms of our country limit. Also, our balance sheet is growing and our investments will also grow accordingly,” he added.
So far, FMO has invested about 703 million euros in India across 61 companies. As a strategy, the bank focuses on sustainable economic and social development across three sectors— financial institutions; energy; and agri-business, food and water.
“Our investments in India are roughly divided into financial institutions which form 36.5%, energy which forms 31.5%, agriculture, food and water makes for 10.9% and other sectors constitute 21.1% of our gross India portfolio,” said Mierlo.
The development bank has done 15 successful exits across its India portfolio and recorded double-digit returns from its investments in financial institutions such as MAS Financial Services, Equitas and Ujjivan, he said.
Apart from direct investment in companies, FMO has also supported private equity fund managers that invest in themes similar to its own. Going ahead, the development finance institution wants to increase the proportion of direct investments in its portfolio.
“As a global strategy, we look to increase our direct equity investments. Presently, the ratio between indirect and direct equity investments on is 60:40, and we would like to turn that around to 40:60 as a direct communication with companies helps us maximize impact and focus,” said Mierlo.
The bank has also invested $37 million in Aavishkaar Group, India’s biggest homegrown impact investor by size of investments, it said.
“We look to use the funds to hire talent across Asia and Africa. We look to replicate the kind of platform we have created in Africa as well, where we may start a bank to cater to different financial needs for low-income households and strengthen our ability to deliver impact sustainably,” said Vineet Rai, founder and chairman of Aavishkaar Group.
Presently, FMO has invested across 18 funds in India, including Caspian Impact Investments, Lok Capital, Omnivore, Kaizen Private Equity, BanyanTree Growth Capital, Ventureast, Omnivore Capital and Baring India.
Some its recent direct investments in India include a $35 million investment in InCred, a Mumbai-based non-banking finance company (NBFC) that focuses on lending to small business and micro-entrepreneurs, a $30 million debt investment in Kolkata-based Srei Equipment Finance Ltd, which finances or leases out equipment used for renewable energy projects. Other companies in its portfolio include Intellecash, Mera Doctor, Sahyadri Farmers Producer Company and Zameen Organics.
The article was first reported on Livemint.com