Grameen Financial Services (Grameen Koota), the Bangalore-based micro-finance institution is understood to be in advanced discussions to raise $10 million through the private equity route. The company had earlier raised resources from Aavishkaar Goodwell, MicroVentures and Incofin. Suresh Krishna, Managing Director, Grameen Financial Services confirmed to Business Standard that they are in various stages of discussions with few funds and they should be taking a final call on the funding at the earliest.
This move by Grameen Financial Services comes close after the company successfully raised resources through the NCD route during end of 2012. Grameen Financial Services received a sanction of $4 million of subordinated debt from Global Commercial Microfinance Consortium II B.V., Netherlands, a fund managed by Deutsche Bank. The amount raised through this Fund which is a Qualified Foreign Investor, is in Indian Rupees through issuance of non-convertible debentures on a private placement basis. The NCDs are Unsecured, Subordinated, Rated and Listed. The subordinate debt raised qualifies for Tier-II Capital.
In addition to this, Grammen Koota, which raised NCDs of $7 million (Rs 35 crore) from DWM in February 2011, successfully completed rollover of the NCDs for 1 year, as per the original terms of sanction. The redemption of the NCDs consequent to rollover would be from November 2013 and ending April 2014. The DWM rollover also required a reaffirmation of ‘rating’ of GFSPL, which was carried out by ICRA. GFSPL retained its ‘LBBB-‘rating, which was assigned in May 2012. The rollover procedure was consequent to DWM’s exhaustive due diligence and GFSPL’s adherence to all stipulated terms and conditions of sanction and reaffirmed DWM’s confidence in the company’s management, systems, practices and future outlook.
The company had earlier during mid-2012 raised Rs 25 crore through a NCD route which saw the participation of global impact investment firm, ResponsAbility Social Investments, and will be listed in the Bombay Stock Exchange. Grammen Koota had earlier raised Rs 35 crore in February 2012 through the same instrument.
GFSPL loan book currently stands at Rs 400 crore and further equity infusion will enable the company to expand its activities during next fiscal at a faster clip. Even as this company is expanding its operations, it is in advanced stages of getting into housing micro-finance, a segment which is under-served by MFIs in India.
Grameen Koota is finalising a business plan to improve access to affordable housing for the underserved lower-income households, particularly in rural India and build market confidence in the commercial viability of lower-income segments. It is understood that based on a pilot project of this, Grameen Koota can consider setting up a stand-alone specialised housing finance company catering to lower-income segments, which will not only enable faster scale-up and greater outreach, but also open up avenues for long-term institutional refinancing for the institution.
According to people who are working closely with Grameen Koota in this project, Grameen Koota is looking to occupy this space where there are not many MFIs and one which has good potential as many MFIs focus more on short-term loans to the rural and urban poor or for their business needs. "It is fairly unexplored. In order to meet the large demand for housing finance among the lower-income segment, there is a need for specialized microfinance institutions such as GFSPL to enter this market.
This project could also provide the much needed demonstration effect to trigger further private sector interventions in this space and free up government resources and subsidies for other uses," a senior analyst told Business Standard.