International Finance Corporation (IFC), the private sector investment arm of World Bank, is investing $50 million in non-banking financial company (NBFC) Au Financiers (India) Ltd through non-convertible debentures (NCD) to be issued by the company, as per an IFC disclosure.
IFC's investment in Au Financiers, which is an existing portfolio firm of the World Bank arm, would help in scaling up operations of Jaipur-based NBFC in semi-urban and rural areas of Rajasthan, Maharashtra, Gujarat, Madhya Pradesh, Chhattisgarh, Punjab, Goa, Himachal Pradesh and Haryana.
Through the investment, IFC expects the company's existing clients to mobilise substantially longer tenor loans than those available to them from traditional wholesale sources. It would also strengthen their financial position as they may not able to raise bank funding during the transformation phase. Au Financiers is one of the 10 firms that got in-principle nod last year from the Reserve Bank of India (RBI) to start a small finance bank.
A strong balance sheet position to begin with will be beneficial for the small banks to garner retail deposits and other funds.
The company primarily originates loans which are classified under priority sector and agriculture lending targeted at segments that find it challenging to access bank financing.
It originates vehicle loans, small business loans against collateral mainly in semi-urban and rural areas. Au Financiers offers MSME loan with a ticket size of Rs 2 lakh-50 lakh and tenor of 5-10 years, for income generating activities of micro and small manufacturers and service enterprises, and agriculture based SMEs.
In an equity transaction, IFC, along with Kedaara Capital, ChyrsCapital Investment Advisors India and Warburg Pincus part-exited the company and Motilal Oswal Private Equity sold all its stake.
IFC first invested in 2010. In 2012, Au Financiers raised about Rs 246 crore from Warburg Pincus and IFC. In February 2013, ChrysCapital bought a 10% stake for Rs 120 crore from the Motilal Oswal PE fund and the company’s founders.
In March 2014, the NBFC raised almost Rs 124 crore from IFC, Warburg Pincus, ChrysCapital, Motilal Oswal PE and its promoters.
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