Bangalore-based microfinance firm Ujjivan Financial Services Pvt Ltd is planning to raise around $25 million through equity funding in the coming months. This comes as Ujjivan has raised Rs 23 crore ($5 million) through private placement of non-convertible debentures (NCDs).
“Ujjivan plans to raise equity to the tune of around $25 million (Rs 110 crore) in the next few months,” an Ujjivan spokesperson told VCCircle. The company is backed by investors like Sequoia Capital, Lok Capital, Elevar Equity, Michael & Susan Dell Foundation and Bellwether Microfinance Fund, among others. The firm’s last equity round was announced in late 2008, when it raised Rs 88 crore.
With private equity funding drying up in this sector, MFIs like Ujjivan are tapping alternative sources of funding. The current issue, arranged by and placed with Standard Chartered Bank, is the third NCD issue by Ujjivan. In January, 2011, it raised Rs 40 crore by placing NCDs with DWM (Cyprus), a member of the Developing World Markets group. Ujjivan Financial had also raised Rs 45 crore through its first NCD issue in August, 2010.
“Ujjivan’s capitalisation is adequate for its present size of operations. However, the current equity base needs to be strengthened for planned growth and expansion,” stated a recent ICRA report on Ujjivan, grading its NCD issue at LBBB-.
“This reiterates the faith of banks and financial investors in Ujjivan. During FY 2010-11, Ujjivan has shown consistent performance and growth amidst crisis,” said managing director Samit Ghosh in a statement about Ujjivan's NCD issue.
Ujjivan, a partner of the Grameen Bank in Bangladesh, also raised Rs 17.3 crore through its first securitisation transaction in May this year.
Founded by managing director & CEO Samit Ghosh, Ujjivan is headquartered in Bangalore, with offices in New Delhi, Kolkata & Pune. As of March, 2011, it operates a network of 351 branches across 20 Indian states. Ujjivan has a portfolio of Rs 625.14 crore and in FY11, it has disbursed loans worth Rs 1,141 crore. The firm has reported a net profit of Rs 11.4 crore and total income of Rs 108.8 crore in FY11.
There have been encouraging signs when it comes to PE funding in this space.For instance, Citi Venture Capital International (CVCI) led the Rs 65 crore, third-round funding of Bangalore-based microfinance institution Janalakshmi Financial Services last month.