International Finance Corporation plans to provide $50 million (Rs 351. crore) in debt funding to affordable housing loan provider Aavas Financiers Ltd.
IFC will provide the money either by subscribing to non-convertible debentures or as a commercial loan, the World Bank's private-sector investment arm said in a disclosure.
Aavas Financiers will use the capital to expand its affordable housing finance programme in the semi-urban and rural parts of Rajasthan, IFC said.
The Washington D.C.-based institution said it will make the investment over a period of five years, and will also help Aavas in increasing its investor and borrower base.
According to the disclosure, approximately 85% of Aavas’ loans are used to build self-constructed single-unit houses. Around 40% of the company’s customers are first-time borrowers and 65% are self-employed.
This is not the first time IFC has invested in Aavas. In 2017, the institution invested $20 million (around Rs 130 crore then) in the company. At the time, it said the funding was one in a series of investments aimed at contributing to the national goal of providing “housing for all by 2022”.
Founded by chief executive officer Sushil Agarwal, Aavas was incorporated in 2011 as a wholly owned subsidiary of AU Small Finance Bank Ltd. In 2016, AU Small Finance sold its stake in Aavas to private equity investors Kedaara Capital and Swiss investment firm Partners Group to meet small finance bank guidelines set by the Reserve Bank of India.
The company made a weak stock market debut in October 2018, with its shares beginning trading at Rs 758 apiece on the BSE as compared to its issue price of Rs 821. Its initial public offering had failed to achieve full subscription, in part due to weakening confidence in non-banking financial companies following Infrastructure Leasing & Financial Services defaulting on its debt payments.
IFC has invested in several other non-bank lenders in India in recent weeks. In April, the institution said it planned to make a debt investment of $150 million in mortgage lender Piramal Capital & Housing Finance Ltd.
The institution also offered up to $100 million in debt funding to Tata Motors Finance Ltd and announced a plan to invest up to $75 million in Mahindra & Mahindra Financial Services Ltd to augment its lending to micro, small and medium enterprises.
