MICROCAPITAL STORY: Legatum Invests $8.4m in Mumbai-based Microfinance Investment Consultant, Intellecap

Legatum Capital, a private firm that invests in global capital markets and social development initiatives, announced that it has invested USD 8.4 million (INR 34 crore or 340 million) in Intellecap, a company based out of Mumbai and Hyderabad, India which provides business advisory services to investors and organizations seeking both financial and social returns on investments. Among the services offered by Intellecap is Intellecash, a microfinance best practices franchise package that, according to the website, provides franchisees “with the information, systems, and processes that are required to start and manage profitable microfinance operations.” This is India’s first microfinance franchising initiative.

The investment by Legatum ensures that Intellecap will be poised to build new initiatives in the field of finance and strategy in the microfinance sector. Intellecap plans to focus its resources on the areas of health, education and technology in the years to come. The organization is making preparations to further develop its services in India, as well as to expand to other countries in the near future.

This deal is not the first time the two organizations have collaborated. In May of this year, Legatum made the largest microfinance equity investment to date, investing USD 25 million and acquiring a majority stake in SHARE Microfin Limited, India’s largest microfinance institution (MFI). Intellecap acted as Legatum’s financial adviser on this landmark transaction. SHARE has 827,000 borrowers—all of whom are women—and a gross loan portfolio of USD 91.7 million. As of March 2007, the organization also had USD 101 million in total assets, a return on assets of 1.22 percent and a return on equity of 15.31 percent.

Legatum’s investments in the microfinance sector are not philanthropic in nature, nor are they part of any system of corporate social responsibility. It is clear that the firm views microfinance differently from other charitable efforts.

The same month that Legatum landed in the record books, the Dubai-based firm also bought a USD 4.5 million stake in the Financial Information Network & Operations Limited (FINO), a banking technology company based in Mumbai that seeks to help microfinance lenders “bring urban to the rural.” Less than a month later, Coronet Capital, a wholly-owned subsidiary of Legatum, acquired a 13 percent stake in A.Little.World, a company which integrates a microfinance model with a new multi-bank payment system in order to bring mainstream banking capabilities to the large population of un-banked rural Indians. The amount of the investment was not disclosed.

Legatum was founded in 2006 by New Zealand-born billionaire Christopher Chandler. The firm has over USD 1 billion invested in the Indian stock market, mainly in financial institutions. It has stakes in ICICI, India’s largest private sector bank in terms of market capitalization and second-largest in terms of overall assets with USD 79 billion; Housing Development Finance Corporation Limited (HDFC), a premier housing finance company; HDFC Bank Limited, a commercial bank with INR 912 billion (pg 2-USD 23.1 billion) in total assets as of March 2007; Axis Bank (formerly UTI Bank), the first private sector financial institution approved by the Reserve Bank of India which currently holds INR 733 billion (pg 37-USD 18.5 billion) in total assets; and others.

Additional Resources:

Business Standard: “Legatum invests Rs 34 crore in Intellecap”

The Press Trust of India Limited: “Legatum invests Rs 34 crore in Intellecap.” October 8, 2007. Accessed via Factiva. (Subscription only).

MicroCapital article, May 31, 2007: “New Zealand-based Billionaire’s Legatum group buys $4.5 million Stake in Indian Microfinance Firm“

Legatum Capital

Intellecap

Intellecash

Intellecash: Read More

SHARE Microfin Limited

SHARE Microfin Limited: Latest News: “Ground-breaking Investment by Legatum and Aavishkaar-Goodwell to Support SHARE’s Growth to 6 Million Clients by 2012”

Microfinance Gateway: “Indian MFI Share Microfin Ltd. Receives Largest Microfinance Equity Investment to Date“

Microfinance Information eXchange (MIX): SHARE (SHARE Microfin Ltd.)