CDC invests Rs 1,000 crore in India Infoline Finance

CDC would be holding 15% equity in the NBFC

The UK government-owned CDC Group said it would acquire a 15 per cent stake in Mumbai-based India Infoline Finance, a non-bank finance company, for Rs 1,000 crore.

Owned by IIFL Holdings, a diversified financial group, it will use the capital to expand in semi-urban areas and its offering in affordable housings.

This is the second high-profile investment in a IIFL Group company. Late last year, Canadian investor Prem Watsa’s Fairfax India increased its stake in IIFL Holdings to 30.7 per cent from the earlier 8.8 per cent, through an open offer worth Rs 1,341 crore.

The proposed investment by CDC is through compulsorily convertible preference shares, resulting in about 15 per cent equity stake on a fully diluted basis.

This is also the second time CDC is investing in IIFL Group. It was also an initial private equity investor in 1999 in indiainfoline.com, which it exited in 2004-05.

“IIFL's strategy of focusing on small-ticket retail credit to under-served geographies and segments resonates with CDC's investment objectives,” said Nirmal Jain, founder and chairman, IIFL Holdings.

A CDC representative will join the board of directors. It has much experience in financial services, having made multiple investments in these, including in small finance bank licence holders Equitas and Ujjivan.

IIFL Finance has a diversified offering — home loans, loans against property, commercial vehicle financing, health care finance, gold loans, capital market finance and business loans to small and medium enterprises (SMEs). It has about 1,000 branches.

“Their participation will help us expand in various areas like micro and SME finance, and affordable housing, as they have good experience in those areas,” said Rajamani Venkataraman, managing director.

For the financial year ended March 31, IIFL Finance’s loan book was Rs 17,770 crore and net profit was Rs 340 crore. New funding will improve the capital adequacy ratio, currently 17.7 per cent.

“CDC’s ability to provide long-term capital means we can provide IIFL Finance with the patient backing it needs to reach even more customers in under-served sectors and regions of India,” said Srinivasan Nagarajan, head-South Asia at CDC. CDC is one of the oldest funds investing in India. The value of its current investment portfolio across 320 companies is a over $1.5 billion.

There are over 10 direct investments and a large number of those were invested in by PE funds which raised funds from CDC. In 2012, the development finance bank shifted its focus on direct investments from the fund of funds strategy it had till then.

In April Nagarajan said that CDC planned to invest $750 million in India in the next three years, a majority through direct investment in both equity and debt opportunities.