MICROCAPITAL STORY: BlueOrchard Microfinance Invests $5.3m and Purchases Equity Stake in Indian Microfinance Institution Asmitha Microfin Limited

On September 30, BlueOrchard Private Equity, the private equity arm of BlueOrchard Microfinance Investment Managers, invested INR 250 million (USD 5.3 million) and purchased a minority stake in Asmitha Microfin Limited, the fourth largest non-banking financial company in India. This will be BlueOrchard’s first equity investment deal with an Indian microfinance institution (MFI). With the new investment, Asmitha intends to expand its capital base and to bolster its borrowing capacity in order to shore up its microfinance lending operations. The new partnership is a strategic development for BlueOrchard, which hopes to consolidate its presence in India in the coming years.

“We are very proud to have been invited by Asmitha Microfin Ltd. Promoters as their first key external stakeholder,” said Jean-Philippe de Schrevel, CEO of the Private Equity arm of BlueOrchard. “We intend to support Asmitha’s growth ambitions both financially and strategically, always keeping in mind the necessary dual returns—social and financial—intrinsic to the very success of microfinance.”

Created in 2001 in Geneva, Switzerland, BlueOrchard is microfinance intermediary that specializes in the commercial asset management of microfinance by sponsoring and/or servicing a number of special loan and debt securities. For example, BlueOrchard serviced the BlueOrchard Microfinance Securities I, a collateral-debt obligation (CDO) that provided seven-year loans at fixed rates to 14 MFIs in developing countries for a total of USD 80.3 million (for more information, please see the BO MS I Factsheet). BlueOrchard also sponsored and serviced the BlueOrchard Loans for Development in 2006 (BOLD 1) and 2007 (BOLD 2), additional CDOs that with the help of Morgan Stanley, who acted as arranger and placement agent, funded a number of MFIs in several emerging economies with fixed-rate five-year loans. These and other issues to MFIs over the past eight years laid the groundwork for the launch of a separate private equity fund at the end of 2007. For more information, see Microcapital’s coverage of BlueOrchard’s investment deal with Morgan Stanley, its partnership with the Microfinance Bank of Azerbaijan and its contribution to the development of microfinance securitization.

Established in 2002, Hyderabad-based Asmitha Microfin Limited is an MFI that provides collateral-free micro-loans to low-income rural women in order to generate for them self-sustaining livelihoods and incomes. Asmitha serves 850,000 clients in thirteen Indian states. As of March 31, 2008, the MFI possessed USD 83.7 million in its gross loan portfolio and USD 104.8 in total assets. Its return on assets was 1.43 percent and its return on equity was 17.87 percent. Its total debt-equity ratio was 1015.7 percent. Forbes magazine ranked Asmitha 29th best among the top 50 MFIs in the world, and the MIX Market, the microfinance information clearinghouse, rated of the level of Asmitha’s financial disclosure as three out of five stars.

Additional Resources:

Asmitha Microfin Limited

BlueOrchard Microfinance Investment Managers

BlueOrchard Microfinance Securities 1, LLC Structure Factsheet

Microcapital Monitor: “Morgan Stanley and BlueOrchard Finance Launches USD 108mm Bond Backed by Microfinance Loans”

Microcapital Paper Wrap-up: “Securitization in Microfinance, By Brad Swanson”

Microcapital Story: “ING Review of Morgan Stanley, the First Investment Bank Microfinance-Oriented Group, and Prior Deals with Blue Orchard Finance”

Microcapital Story: “Microfinance Bank of Azerbaijan Partners with Blue Orchard Microfinance in US$129 Million Bond Issue”

The MIX Market: Asmitha Microfin Limited

The MIX Market: BlueOrchard Microfinance Securities 1 (BOMS1)

The MIX Market: BlueOrchard Loans for Development 2006-1 (BOLD 2006-1)

Symbiotics: “First Direct Investment of BlueOrchard Private Equity in India Goes to Asmitha Microfin Limited”