NVP picks up 8% in Shriram City Union

Norwest Venture Partners (NVP), a global venture capital firm, has bought an 8 per cent stake in Shriram City Union Finance for Rs 120 crore. NVP picked up the stake from Indopark Holding, a subsidiary of Merrill Lynch.

This will be Norwest’s fourth later-stage investment in the first half of this year and first in the financial sector. Since the beginning of this year Norwest has invested around $100 million in India.

Niren Shah, managing director, NVP India, said, “When you look at the retail-level credit market, semi-urban and rural areas are under-served. Shriram is better placed to serve that market. The company has done very well, especially in the last 8-12 months, when markets were stressed. The size of the consumer finance market in India is expected to grow significantly over the next four-five years.”

Norwest’s focus on the secondary market is recent. The firm has been actively investing in early and mid-stage firms. In a similar deal, it had bought 5 per cent in Onmobile, which provides mobile value-added applications, and 2.11 per cent in the National Stock Exchange for Rs 250 crore.

Shah says the firm is in for a long haul and will stay invested for three-five years. “Generally, we would like to have an IRR (internal rate of return) of 25 per cent. But in the growth segment, a 2x return is fine. We have been investing through the downturn and will continue to look at opportunities,” said Shah.

Shriram has private equity investors like Chrys Capital, ICICI Ventures and TPG Capital. As a deposit-accepting non-banking financial company, Shriram City is one of the leading financial services company specialising in small-ticket retail finance. The company serves 1.5 million customers across India.