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Global PE investors warm up to India’s microfinance sector

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Kolkata: Overseas private equity investors are making a beeline to raise their stakes in India’s small and micro lending landscape, which has turned around from the lows seen during Covid-19 and is again back on the growth track.

In one of the biggest investments in the microfinance space in recent times, British International Investment along with existing investors Incofin Investment Management, Nordic Microfinance Initiative (NMI) and Dutch impact investor Triple Jump will be putting in about $25 million or ₹196 crore in Ahmedabad-based Light Microfinance, which has made strides over the past few years.

British International Investment will be investing $9.2 million in the NBFC-MFI while NMI will raise its holding by another $7.9 million, Triple Jump by $5.4 million and Incofin by $2 million, people familiar with the development said. These three existing investors came on board between 2020 and June 2021 with a cumulative $10 million investment.

“We plan to use the proceeds of the fresh investment in geographic expansion and to boost our technology backbone,” managing director Deepak Amin told ET.

Founded in 2009 by Amin, Rakesh Kumar (chief executive officer) and Aviral Saini (chief financial officer), Light is planning to explore Uttar Pradesh, Himachal Pradesh and Odisha for expansion beyond its existing operations in Gujarat, Rajasthan, Madhya Pradesh and Haryana.

The lender, which had its assets under management at ₹1,060 crore at the end of March, aims to grow its book to ₹1,800 crore by March 2023

It also plans to invest in multiple technology interventions as it looks to ramp up its digital lending initiative as well as other technology-based interventions such as artificial intelligence-driven analytics platforms and mobile applications.

In another development, private equity firm Warburg Pincus and International Finance Corporation (IFC) have infused ₹390 crore in Avanse Financial Services – an education-focused non-bank lender – through a rights issue of shares.

Warburg Pincus holds 80% in Avanse through affiliate Olive Vine Investment while IFC holds the balance of 20%. With this capital infusion, Avanse’s net worth has risen to about ₹1,450 crore. The funds would help Avanse in its next phase of growth, managing director Amit Gainda said.

In parallel, UK’s Greater Pacific Capital is all set to raise its stake in microlender

Microfin to 16% by pumping in $10 million. Muthoot Microfin’s managing director Sadaf Sayeed told ET that the deal is likely to conclude soon.

Meanwhile, Geneva-based Symbiotics Investments has invested ₹65 crore of debt in Aye Finance, a lender to micro, small and medium enterprises. Aye, which had a loan book of ₹1,730 crore at the end of March, is eyeing a 50% growth this fiscal.

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