Sequoia Capital bets on another microfinance player

After backing SKS Microfinance, Sequoia Capital is now betting on another microfinance player, Bangalore-based urban poor-focused Ujjivan Financial Services, a member of the Grameen Network, Bangladesh. Sequoia Capital on Wednesday said it had participated in the fifth round of equity financing by Ujjivan, and was now the single-largest shareholder, with a stake of around 15.7 per cent.

It added it had raised Rs 127.9 crore ($25.5 million). Two new foreign institutional investors (FIIs), FMO (Netherlands Development Finance Company) and WCP Mauritius Holdings III (Wolfensohn Capital Partners), along with current investors, participated in this round. The existing investors are Lok Capital, Unitus Corporation, Elevar Equity, Caspian Advisors, besides Sequoia. With the latest round of fund raising, private equity funds have invested a total of Rs 230 crore and hold 83 per cent in the company. The promoters group, led by Samit Ghosh, managing director, Ujjivan, hold around four per cent and has so far disbursed Rs 2,800 crore.

Mohit Bhatnagar, managing director, Sequoia Capital, said India continued to be a preferred investment destination for FIIs and it was heartening to see fundamentally strong organisations in the microfinance sector were a key focus. Samit Ghosh said, “We thank our existing investors who continue to reiterate their commitment to us and welcome our two new investors. This round of equity funding will make Ujjivan one of the best capitalised MFIs in the country". With this round of equity funding, the last being in 2009, Ujjivan's capitalisation has more than doubled to Rs 230 crore. Kotak Investment Banking was the advisor and arranger of the transaction.

Sanjiv Kapur, managing director, Wolfensohn India Advisors Pvt Ltd, said, “This is the first investment for Wolfensohn in the Indian microfinance sector, endorsing our faith in the sector and in Ujjivan's financial inclusion model.” Sudha Suresh, Ujjivan's chief financial officer said the additional capital would help increase the loan book from the current Rs 600 crore to around Rs 1,600 crore, given the Reserve Bank of India's 15 per cent capital adequacy requirement for MFIs that are non-banking financial companies.

"We are very happy to work with Ujjivan, which is constantly searching for ways to better serve the urban poor. Their firm focus on their mission to alleviate poverty and strong business credentials make Ujjivan a very interesting partner for FMO” said Keesjan de Kruijf, senior investment officer, FMO.

"When we look for large MFIs which are truly client centric, transparent, have good systems, great leadership, and are sincere in its social objectives, Ujjivan is the only MFI which comes to our minda. Our investment is built around making it the borrower of choice for the base of the pyramid, across the country", said Venky Natarajan, managing partner, Lok Capital.

Ujjivan serves over a million clients in 20 states and 49 under-banked districts across the country.

Recently, Ujjivan received the ‘Microfinance Organisation of the Year’ award and was ranked No1 in the microfinance industry as the best company to work for in India.