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IFC to make Rs 150-cr equity investment in Equitas & Ujjivan MFIs

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(IFC) is to make an equity investment of around Rs 150 crore in Chennai-based microfinance company Pvt Ltd and Bangalore-based Ujjivan Financial Services. These would help both (MFIs) to support their geographical and business expansion and meet capital adequacy requirements for the next three to five years.

Of the total, Rs 100 crore is to go in Equitas, founded by P N Vasudevan, who was involved in consumer financing for a little over 20 years in Cholamandalam Finance, where he was a vice-president. His last commercial assignment before starting Equitas was as head of consumer banking at Development Credit Bank.

Apart from Vasudevan, other shareholders include the Small Industries Development Bank of India (Sidbi), Sequoia Capital, Bellwether, Aavishkaar Goodwell, IFIF, Microventures, CLSA, Canaan, Aquarius and Helion.

According to IFC’s project disclosure, the proposal envisages an equity investment in Equitas Holdings, the holding company of Singhivi Investment and Finance Pvt Ltd. Singhivi operates Equitas Microfinance, amongst the top 10 MFIs in India. Equitas Microfinance has a borrower base of 1.2 million across five states, including the low income ones of Rajasthan and Madhya Pradesh.

Equitas has also recently started begun businesses in the area of affordable housing through Equitas Housing Finance Pvt Ltd and used commercial vehicle financing through Equitas Finance Pvt Ltd to cater to the relatively unbanked population in these financial services segments.

IFC's investment will also help the company diversify sources of funding by providing comfort to potential lenders and investors. This investment is expected to help the company broadbase its profile of investors with long-term perspectives, said the Corporation.

Similarly, IFC proposes to invest equity of up to Rs 50 crore for a stake in Ujjivan, founded by Samit Ghosh, an international banker for a little over 30 years and part of the pioneering team which launched consumer banking in India at Citibank in 1985. The other shareholders include foreign individual investors, Bellwether, AW Holdings, the Michael and Susan Dell Foundation, India Financial Inclusion Fund, Unitus, Elevar, Sequoia Capital, Lok Capital Group, FMO and Wolfensohn Capital Partners.

Ujjivan has about 1.1 million members and a of about $140 million equivalent. The proposed project intends to help Ujjivan fund its expansion and carry out changes to cope with the changed regulatory and business environment, meeting its regulatory capital adequacy requirements for the next three to five years.

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