Fullerton India raises Rs500 crore from IFC through masala bonds

IFC has invested Rs500 crore in 5-year unrated masala bond issuances of Fullerton India

Proceeds from the masala bond fund-raise will be used to strengthen Fullerton India’s reach in the underserved retail and micro, small and medium enterprise (MSME) segment, especially in developing states. Photo: iStockphoto

Fullerton India Credit Company Ltd, a non-banking financial company (NBFC) owned by Singapore-based Temasek Holdings Pte. Ltd, on Thursday said it had raised Rs500 crore ($76 million) from the International Finance Corp. (IFC), a member of the World Bank Group.

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Funds were raised by issuing masala bonds having a maturity of 5 years, the company said in a statement. Masala bonds are rupee-denominated offshore bonds.

Its product portfolio includes loans against property, loans to small and medium enterprises, commercial vehicle and two-wheeler loans, personal loans, rural livelihood loans and rural mortgage. As on 30 June 2017, the assets under management (AUM) of the company stood at Rs11,752 crore, serving 15.2 lakh customers through a network of 526 branches.

The proceeds from the masala bond fund-raise will be used to strengthen Fullerton India’s reach in the underserved retail and micro, small and medium enterprise (MSME) segment, especially in developing states, the statement said.

“We started focusing on MSME financing in rural and urban India in 2011, which now represents a significant portion of our lending. IFC’s earlier investment in 2015 helped us increase our support to MSME segment. IFC’s renewed support, via masala bonds strengthens our relationship and paves the way for steady and inclusion-led growth of the company’s MSME loan portfolio,” said Anand Natarajan, head of strategy and business execution at Fullerton India.

In 2015, Fullerton India had raised Rs450 crore from IFC through secured non-convertible debentures, Mint reported.

The MSME space is of interest to international investors such as IFC given the shortage of long-term funding.

According to an IFC-Government of Japan 2012 study on MSME financing in India, there is a total finance gap of $311.9 billion against a total finance demand of $485.7 billion.

Axis Bank Personal Loan“MSME financing is a strategic focus area for IFC to promote financial inclusion, create jobs, and drive economic growth. Our investment in Fullerton India through long-term capital markets instruments will set a market precedent and enhance the path for other similar institutions, to issue local currency bonds offshore,” said Jun Zhang, IFC’s country head for India.

IFC has invested close to $1 billion in financial intermediaries in India to enable credit financing for SMEs.

The World Bank arm has been one of the leading institutional investors supporting alternative forms of fund-raising such as masala bonds and green bonds.

In November 2014, IFC’s Rs10,000 crore, rupee-denominated bonds, which were listed on London Stock Exchange, marked the first issuance of so-called masala bonds.

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Earlier this year, IFC said that it was looking at providing up to $40 million in senior debt to Tata Cleantech Capital Ltd, through green bonds.

Funds raised through green bonds are used to finance environmentally friendly projects such as renewable energy generation.

Tata Cleantech, a joint venture between Tata Capital Ltd and IFC, plans to use the proceeds to finance wind, solar and other climate projects that meet the green bond eligibility criteria, Mint reported in May.

Source: Live Mint