IFC leads $222m funding round in Indian NBFC Cholamandalam Investment

Photo: Mint

World Bank’s private sector-focused investment arm, International Finance Corporation (IFC) has led a $222-million debt investment round in Murugappa Group’s non-banking financial company, Cholamandalam Investment and Finance Company Ltd, the company said in a statement.

This is IFC’s third investment in Cholamandalam after the funding rounds in 2010 and 2014.

While IFC invested $92 million from its own account, the remaining was syndicated from United Arab Emirates-based First Abu Dhabi Bank ($50 million) and National Bank of Ras Al-Khaimah PJSC ($20 million), Japan’s largest bank MUFG Bank Ltd ($50 million) and Taiwan’s CTBC Bank Co., Ltd ($10 million).

This is the first such US dollar-syndicated deal since January 2019, when the Reserve Bank of India permitted NBFCs to tap into the offshore credit market, the statement said.

“Supporting productive asset financing NBFCs is part of our financial inclusion strategy because it offers income opportunities and an escape from poverty to low-income households,” said Jun Zhang, IFC country head, India. “Cholamandalam’s wide reach amongst small road transport operators and MSMEs makes it the right partner for us to reach these underserved segments.”

Founded in 1978, Chola’s core business is to provide commercial vehicle finance and loan against properties. Besides those, the company also does home loans, SME loans, investment advisory services, stock broking and a variety of other financial services to customers. Considering nearly half of its clients are in low-income states and 80% of them are first-time buyers or drivers-turned-owners, the Chennai-based NBFC plans to use the funds to finance micro and small borrowers for expanding further in its existing states and in rural and semi-urban geographies.

Cholamandalam operates from 900 branches across India with assets under management of over 54,000 crore.

“IFC’s strong commitment to the NBFC space and support in helping us access credit from foreign investors will reinforce the important role played by the NBFC sector in providing last-mile credit. This arrangement, led by IFC, has helped Cholamandalam tap a new investor base for its borrowings at competitive rates, which will support its growth plans,” said Arun Alagappan, executive director at Cholamandalam.

The latest debt deal by IFC follows its $35-million lending to gold loan-NBFC Manappuram Finance Ltd, which was announced on Tuesday. Being one of the early institutional investors in the NBFC space, IFC has also invested in other microfinance companies and NBFCs such as Bandhan, PNB Housing Finance Ltd, Janalaxmi Financial Services, Mahindra and Mahindra Financial Services Ltd, Vistaar Financial Services, Magma Fincorp Ltd and Au Financiers Ltd.

The global development institution’s portfolio in India, its biggest investment destination, stood at $6 billion as of June 2018, according to its website.

This article was first published on livemint.com