India: Veritas Finance raises $10m from CDC Group

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CDC Group Plc, the UK government’s development finance institution, has invested $10 million (Rs65 crore) in Veritas Finance Pvt. Ltd, which lends to micro and small enterprises, the company said in a statement on Wednesday.

Founded in 2015, Chennai-based Veritas Finance was registered as a non-banking financial company (NBFC) by the Reserve Bank of India (RBI) in October 2015. It provides long-term finance for business expansion as well as shorter-term loans for working capital needs.

In August, Mint reported that CDC Group was in advanced talks to invest over Rs100 crore in Veritas Finance.

Veritas started with an initial capital of Rs13.60 crore and raised additional equity of Rs30 crore from Lok Capital and others, including Caspian Impact Investment Adviser, in a series A round of fund-raising in 2016.

Existing investor Lok Capital also participated in this round of funding. Veritas intends to use the funds to expand into newer states like Andhra Pradesh and Telangana, deepen its presence in existing locations and aid in the development of new technology that will lower costs for its customers.

“This round of funding will allow us to expand and to also strengthen our technology to achieve higher productivity and bring down the cost of servicing micro-businesses. As a specialised lender in the MSME (micro, small and medium enterprises) segment, we are constantly looking at product innovation and building superior credit assessment methods,” said D. Arulmany, founder and managing director of Veritas Finance.

CDC Group has been an active investor in private lenders, focusing on providing financial services to bottom-of-the-pyramid customers and to small businesses.

In January 2016, CDC invested $50 million (approximately Rs330 crore) as tier II capital in microfinance institution Janalakshmi Financial Services Pvt. Ltd, an erstwhile microfinance institution that is now a small finance bank.

CDC’s other microfinance bets in India include the likes of Equitas Holdings Ltd, Ujjivan Financial Services Ltd and Utkarsh Micro Finance Ltd.

“Our investment in Veritas underlines our commitment to back companies with a strong development impact philosophy and business models that support financial inclusion for India’s disadvantaged. Financial services for the MSME space in India is a huge area, but is also hugely under-served,” said Balaraman, CDC’s South Asia director.

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