Private equity firms are beginning to invest in Indian microfinance institutions (MFIs) that offer products such as insurance, pension plans and chit funds in order to diversify their portfolios. It is reported that private equity firms have invested INR 7.5 billion (USD 138 million) in Indian MFIs this year, as compared to INR 2.5 billion (USD 46 million) invested in 2011. According to Abhijit Ray, director and co-founder of Unitus Capital, a Bangalore-based financial services firm, “[Private equity] funds are looking at MFIs as a marketing channel in rural areas. Almost all prominent MFIs outside Andhra Pradesh are expecting some equity infusion in the near future.”
MicroCapital has reported such investments in several MFIs, including Equitas Holdings, Arohan Financal Services and Ujjivan Financial Services. Equitas received USD 18 million from International Finance Corporation (IFC), a member of the World Bank Group, and USD 9.3 million from MicroVentures, an Italian private equity firm [2,3]. Similarly, Intellecash Microfinance Network, a subsidiary of the India-based social-sector advisory firm Intellectual Capital Advisory Services (Intellecap), acquired a majority stake in Arohan Financal Services [4]. Finally, Ujjivan raised USD 8.55 million from IFC and USD 433,000 from Netherlands Development Finance Company (FMO), a Dutch development bank [5]. Abhijit Ray reportedly added that five to six deals worth a total of INR 2 billion (USD 36.8 million) are expected to emerge in the next few months.
By Sarah Benali, Research Associate
About Unitus Capital An affiliate of Unitus Labs, an India-based nonprofit, Unitus Capital is a financial advisory firm that specializes in arranging capital for microfinance institutions (MFIs) and other enterprises that aim to benefit the poor. Based in Bangalore, India, Unitus Capital offers financial advisory and capital markets services to clients in Asia. Between 2004 and 2010, Unitus Capital reports having arranged USD 25 million in debt capital for microfinance institutions (MFIs).
Sources and Additional Resources
Business-standard.com story: “Now, PE firms eye diversified microfinance institutions,” November 2012, http://www.business-standard.com/india/news/now-pe-firms-eye-diversified-microfinance-institutions/491317/
[2] MicroCapital.org story: “MICROCAPITAL BRIEF: Equitas of India Receives $9.3m from MicroVentures, India Financial Inclusion Funds,” November 1, 2012, https://www.microcapital.org/microcapital-brief-equitas-of-india-receives-9-3m-from-microventures-india-financial-inclusion-funds-2/
[3] MicroCapital.org story: “MICROCAPITAL BRIEF: International Finance Corporation (IFC) to Invest $18m in Equitas Microfinance India, Private Equity Funds Looking to Invest in Indian Microfinance Insitutions,” October 19, 2012, https://www.microcapital.org/microcapital-brief-international-finance-corporation-ifc-to-invest-18m-in-equitas-microfinance-india-private-equity-funds-looking-to-invest-in-indian-microfinance-institutions/
[4] MicroCapital.org story: “MICROCAPITAL BRIEF: Intellecap’s IntelleCash Microfinance Network Purchases 56% Stake in Arohan Financial Services of India,” October 8, 2012, https://www.microcapital.org/microcapital-brief-intellecaps-intellecash-microfinance-network-purchases-56-stake-in-arohan-financial-services-of-india/
[5] MicroCapital.org story: “MICROCAPITAL BRIEF: India’s Ujjivan Raises $9m in Equity from International Finance Corporation (IFC), Netherlands Development Finance Company (FMO),” October 1, 2012, https://www.microcapital.org/microcapital-brief-indias-ujjivan-raises-9m-in-equity-from-international-finance-corporation-ifc-netherlands-development-finance-company-fmo/
MicroCapital Universe Profile: Lok Capital LLC
https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Lok+Capital+LLC
MicroCapital Universe Profile: Equitas Micro Finance India Private Ltd.
https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Equitas+Micro+Finance+India+Private+Limited
MicroCapital Universe Profile: Arohan
https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Arohan
MicroCapital Universe Profile: Ujjivan Financial Services
https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Ujjivan+Financial+Services
MicroCapital Universe Profile: International Finance Corporation (IFC)
https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=International+Finance+Corporation+%28IFC%29
MicroCapital Universe Profile: MicroVentures SpA
https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=MicroVentures+SpA
MicroCapital Universe Profile: Netherlands Development Finance Company (FMO) https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Nederlandse+Financierings-Maatschappijvoor+Ontwikkelingslanden+N.V.+%28Netherlands+Development+Finance+Company%2C+FMO%29
MicroCapital Universe Profile: Unitus Capital https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Unitus+Capital
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