International Finance Corporation, a part of the World Bank Group, has proposed to invest up to Rs 9,750 million (around $150 million) in HDB Financial Services Ltd, a non-banking financial services arm of Indian banking giant HDFC Bank Ltd.
HDB Financial Services provides financing through a range of loan products, both secured and unsecured, to micro-small and medium enterprises across India.
“The proposed IFC debt facility will enable HDB to expand its individual micro & small business loan portfolio in the low-income states of India,” the investment firm said in a disclosure.
Focussed on borrowers whose credit requirements are less than $10,000, as of March 31, 2018, HDB has an asset base of $6.9 billion and loan portfolio of $6.7 billion. Headquartered in Mumbai, HBD operates across India through over 1,160 branches across 831 cities.
HDB its targeting to grow its portfolio at an average rate of 30-35 per cent over the next five years as well as grow its current customer base at a similar growth rate.
HDB was incorporated as a subsidiary of HDFC Bank, which currently holds 95.87 per cent stake in the company, with the remaining 4.13 per cent being held by management and key personnel associated with HDFC Bank.
IFC is an active investor in the financial services space in India. It recently announced its plan to invest up to Rs 130 crore ($20 million) as senior debt into microfinance institution Arohan Financial Services Pvt Ltd. Prior to that, it also proposed to invest $15 million (Rs 100 crore) in Aptus Value Housing Finance India to support financing for the affordable housing segment.
In its disclosure, IFC said its investment in HDB Finance will help in the growth of sustainable lending to the micro/small enterprises in lower income section of India and build investor confidence in small and micro lending in the segment.
“This project will promote a more geographically balanced growth of microfinance in India by supporting an individual lending model for financing micro / small enterprises as well as small businesses,” it said.