Bengaluru-based microfinance institution (MFI) Grameen Koota Financial Services plans to raise an equity investment of Rs 100 crore from its existing investors by March. This will be a fifth round of funding for the MFI, which is looking to expand to new territories. The existing investors include Creation Investments and MicroVentures. While Creation Investments focuses on private equity investments in MFIs, small-and-medium enterprise lenders and emerging market banks, Luxembourg-based MicroVentures is an MFI-focused investment fund. "Around 2011, getting funding, both equity and debt, was a challenge. However, the funding environment now is reasonably good," said Suresh Krishna, co-promoter and managing director, Grameen Koota. MicroVentures, which holds 60 per cent in Grameen Koota, is keen to increase its stake further. Creation Investments holds the right of first refusal, according to sources. In its last round of funding in March 2014, Grameen Koota had raised Rs 80 crore ($13.5 million) of equity from MicroVentures Investments. This apart, MicroVentures, in a bilateral deal had bought the entire stake of two other investors - Aavishkaar Goodwell India Microfinance Development and Incofin Investment Management - for an undisclosed amount in 2014. The MFI is also looking to raise Rs 300 crore through debt instruments, including non-convertible debentures (NCD) and bank finance, towards the end of this financial year. Also, the MFI is in talks with banks for a securitisation deal, which involves selling its loan portfolio for meeting their year-end priority sector lending target, of nearly Rs 150 crore. As of January, Grameen Koota has 800,000 borrowers spread across 222 branches in 49 districts of Karnataka, Maharashtra and Tamil Nadu, with a loan portfolio of Rs 1,217 crore. After the recent clarity in regulations governing non-banking financial company MFIs, private equity (PE) investments are on the rise.
In the current financial year (till end-January), the sector has received the highest equity inflow in five years. So far in FY15, the sector has raised $276 million through PE deals. This excludes the $258-million equity commitment in Bandhan ($165 million from Singapore's sovereign wealth fund GIC and $93 million from the International Finance Corporation), which is set to become a bank soon. Some of the biggest PE commitments in the microfinance segment include equity investment of $100 million in Ujjivan and $77 million in Janalakshmi Financial Services.