MICROCAPITAL BRIEF: Indian Microfinance Institution Bhartiya Samruddhi Finance Limited (BSFL) Raises $150m from Institutional Investors, Commercial Banks

Bhartiya Samruddhi Finance Limited (BSFL), an Indian microfinance institution (MFI) and member of the BASIX Group of companies, has reportedly raised INR 7 billion (USD 150 million) in debt and equity commitments from institutional investors and commercial banks, in what has been described as a “lifeline” by BASIX chairman Vijay Mahajan. BSFL will receive between INR 5 billion (USD 107 million) and INR 6 billion (USD 129 million) from unnamed commercial banks, with an additional INR 750 million (USD 16 million) from the Small Industries Development Bank of India (SIDBI) and INR 250 million (USD 5.3 million) from HDFC Bank Limited, an Indian commercial lender. The following five financial institutions will jointly invest a total of INR 1 billion (USD 22 million): International Finance Corporation (IFC), the private-investment arm of the World Bank Group; Matrix Partners, a US-based venture capital firm; Axis Bank, an Indian financial services company; Lok Capital, an Indian equity investment firm focused on microfinance; and the Hivos-Triodos Fund (HTF), a Dutch private-public partnership.

On July 28, MicroCapital reported on BSFL’s financial weakness including comments from Mr Mahajan that the MFI would not be able to continue operations unless new capital was raised quickly. The new set of investments is expected to double BSFL’s performing loan portfolio to INR 12 billion (USD 256 million) and raise its capital base from INR 1.2 billion (USD 25.6 million) to INR 3.2 billion (USD 68 million). A portion of the funding will be used to service the interest related to losses in the state of Andhra Pradesh, where BSFL has had to write off approximately INR 4.5 billion (USD 100 million) in bad loans.

Basics Limited, the holding company of the BASIX group, will see its ownership diluted from 35 percent to 20 percent, while equity investors will expand their holdings from 43 percent to 58 percent. The remaining 22 percent will continue to be held by Lok Capital, SIDBI and Aavishkaar Goodwell India Microfinance Development Company, a for-profit private investor in Indian MFIs. Mr Mahajan may be asked to provide a personal guarantee to investors, while commercial banks may seek seats on the board of BSFL.

As of March 31, 2011, BSFL reported to the US-based nonprofit Microfinance Information Exchange (MIX) total assets of USD 352 million, a gross loan portfolio of USD 281 million, return on assets (ROA) of 0.66 percent, return on equity (ROE) of 4.73 percent and 1.72 million active borrowers.

By Rohan Trivedi, Research Associate

About Bhartiya Samruddhi Finance Limited (BSFL):
Bhartiya Samruddhi Finance Limited (BSFL) is a regulated non-banking finance company (NBFC) based in Hyderabad, India, that was founded in 1997. It is part of the BASIX Group, which provides microfinance, agricultural and business development services to poor, rural households. As of March 31, 2011, BSFL reported to the US-based nonprofit Microfinance Information Exchange (MIX) total assets of USD 352 million, a gross loan portfolio of USD 281 million, return on assets (ROA) of 0.66 percent, return on equity (ROE) of 4.73 percent and 1.72 million active borrowers.

About BASIX Group:
BASIX Group is an Indian institution that consists of companies that provide various services targeted at poor people including microfinance, health insurance and agricultural and business development services. The BASIX Group operates through a holding company, Bhartiya Samruddhi Investments and Consulting Services Limited (BASICS Ltd). BASIX Group’s microfinance activities are carried out by two MFIs; Bhartiya Samruddhi Finance Limited (BSFL), a non-banking finance company (NBFC), and Krishna Bhima Samruddhi Local Area Bank Limited (KBSLAB), a rural bank. As of September 30, 2010, BASIX reported a gross loan portfolio of USD 402 million, approximately 3 million clients and operations in 16 Indian states and 6 other countries.

About The International Finance Corporation (IFC):
A member of the World Bank Group, the International Finance Corporation (IFC) offers loans, equity investments, advisory services and technical assistance to private companies with the intent of alleviating poverty and promoting open and competitive markets in developing countries. As of 2011, IFC has 182 member countries that drive its policies and approve disbursements. As of June 30, 2010, IFC reports net income of USD 1.75 billion, total assets of USD 61 billion, return on assets of 3.1 percent and total investment mobilization of USD 18.4 billion to 528 projects.

About Matrix Partners:
Established in 1977, Matrix Partners is a US-based venture capital firm with a principal investment focus in the technology sector. Its investments are focused on early stage companies in the US and India. As of August 2011, financial information is not available on the company.

About Axis Bank:
Established in 1994, Axis Bank, formerly UTI Bank, is a financial services firm based in Mumbai, India. Axis Bank provides personal, corporate and non-resident Indian (NRI) banking services. As of March 2009, Axis Bank reported net revenue of INR 137 billion (USD 2.93 billion) and a net income of INR 18.1 billion (USD 396 million).

About Lok Capital:
Lok Capital LLC is a limited-life, limited-liability company based in Mauritius that provides equity and equity-linked investments to microfinance institutions (MFIs) in India. It consists of a venture capital fund, Lok I, and the Lok Foundation. Lok I was launched in 2006 with USD 22 million. Investors include ACCION International, Commonwealth Development Corporation (CDC), Developpement International Desjardins, Netherlands Development Company (FMO), International Finance Corporation (IFC), Kreditanstalt für Wiederaufbau (KfW) and responsAbility. The fund’s investments generally range from USD 500,000 to USD 3 million. The Lok Foundation provides specialized technical assistance to Indian MFIs.

About The Hivos-Triodos Fund:
The Hivos-Triodos Fund (HTF) was created in 1994 as a joint partnership between Triodos Bank, a private Dutch bank focusing on social investment, and the Humanist Institute for Development Cooperation (Hivos), a non-government organization (NGO) also based in the Netherlands. As of 2009, HTF reported to the US-based nonprofit Microfinance Information Exchange (MIX) total fund assets of USD 64 million.

About HDFC Bank Limited:
HDFC Bank Limited was incorporated by Housing Development Finance Corporation Limited (HDFC), an Indian housing finance company, when the Indian government allowed the establishment of private sector banks. HDFC Bank deals with three business segments – wholesale banking services, retail banking services and treasury. HDFC Bank is headquartered in Mumbai. The Bank has an network of 1,725 branches in 771 cities across India. As of March 2010, HDFC Bank reported approximately USD 56.5 billion in total assets.

About The Small Industries Development Bank of India (SIDBI):
The Small Industries Development Bank of India (SIDBI) was established by the Indian Parliament in 1990. It provides credit and capacity building grants to large- and medium-scale microfinance institutions (MFIs) and individual borrowers. As of March 31, 2010, SIDBI reported total assets of INR 418 billion (USD 90 million).

About Aavishkaar Goodwell India Microfinance Development Company Limited:
Aavishkaar Goodwell is an Indian-Dutch joint venture that is looking to build a portfolio of USD 25 million in 30 to 40 microfinance start-ups and 8 to 10 growing microfinance institutions (MFIs). The investment team in India works alongside the group that manages Aavishkaar India Micro Venture Capital Fund. The Dutch microfinance private equity company Goodwell Microfinance Development Company is the leading investor in Aavishkaar Goodwell, along with development finance institutions and commercial banks including the Netherlands Development Finance Company (FMO), the International Finance Corporation (IFC) and Deutsche Bank.

Sources and Additional Resources:

[1] LiveMint.com: “BSFL to get Rs 800 cr funding form investors”, http://www.livemint.com/2011/08/07231543/BSFL-to-get-Rs-800-cr-funding.html?h=B

[2] MicroCapital.org story, July 28, 2011: “MICROCAPITAL BRIEF: Indian Microfinance Institution BSFL Threatened by Deterioration in Portfolio Quality, Urgently Seeks New Funding to Stave Off Potential Collapse”, https://www.microcapital.org/microcapital-brief-indian-microfinance-institution-bsfl-threatened-by-deterioration-in-portfolio-quality-urgently-seeks-new-funding-to-stave-off-potential-collapse/

MicroCapital.org story, May 30, 2011: “MICROCAPITAL BRIEF: BASIX Group of India Looks to Boost Fee-Based Income by Offering Commercial Banks Access to Its 3.5m Microfinance Customers”, https://www.microcapital.org/microcapital-brief-basix-group-of-india-looks-to-boost-fee-based-income-by-offering-commercial-banks-access-to-its-3-5m-microfinance-customers/

MicroCapital.org story, April 19, 2011: “MICROCAPITAL BRIEF: Indian Banks Seek Personal Guarantees from Microfinance Institution (MFI) Executives As Condition of Debt Restructuring”, https://www.microcapital.org/microcapital-brief-indian-banks-seek-personal-guarantees-from-microfinance-institution-mfi-executives-as-condition-of-debt-restructuring/

MicroCapital.org story, March 7, 2011: “MICROCAPITAL BRIEF: Vijay Mahajan of Indian Microfinance Institution (MFI) BASIX Undertakes 75-Day Journey Across 12 Indian States to Gain Feedback From Poor People”, https://www.microcapital.org/microcapital-brief-vijay-mahajan-of-indian-microfinance-institution-mfi-basix-undertakes-75-day-journey-across-12-indian-states-to-gain-feedback-from-poor-people/

MicroCapital Universe Profile: Bhartiya Samruddhi Finance Limited (BSFL), http://microcapital.org/microfinanceuniverse/tiki-index.php?page=Bhartiya+Samruddhi+Finance+Ltd+%28BSFL%29

MicroCapital Universe Profile: BASIX Group, http://microcapital.org/microfinanceuniverse/tiki-index.php?page=BASIX+Group

MicroCapital Universe Profile: International Finance Corporation (IFC), https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=International+Finance+Corporation+%28IFC%29

MicroCapital Universe Profile: Matrix Partners, https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Matrix+Partners

MicroCapital Universe Profile: Axis Bank, https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Axis+Bank

MicroCapital Universe Profile: Lok Capital LLC, https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Lok+Capital+LLC

MicroCapital Universe Profile: Hivos-Triodos Fund (HTF), https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Hivos-Triodos+Fund+%28HTF%29

MicroCapital Universe Profile: HDFC Bank Limited, https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=HDFC+Bank

MicroCapital Universe Profile: Small Industries Development Bank of India (SIDBI), https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Small+Industries+Development+Bank+of+India+%28SIDBI%29

MicroCapital Universe Profile: Aavishkaar Goodwell India Microfinance Development Company Limited, https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Aavishkaar+Goodwell+India+Microfinance+Development+Company+Ltd

Browse the MicroCapital Universe and add your entry to the wiki at https://www.microcapital.org/microfinanceuniverse/

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