 "CDC eyes debt capital investments in small finance banks")
The UK government-owned CDC Group is tapping opportunities in providing debt capital (Tier-II) to the upcoming Small Finance Banks (SFBs), as the Reserve Bank of India (RBI) issues differentiated bank licences to achieve financial inclusion targets. Last year, the banking regulator issued 10 such licences, of which five are investee companies for CDC. RBI plans to issue more such licences in the coming years.
In 2012, the development finance bank shifted its focus on direct investments from fund of funds strategy it had been playing till then. It plans to invest $750 million in India in the next three years, and a majority will be through direct investment in both equity and debt opportunities.
It did not provide its absolute investment amount in India in three decades of its existence in the country. The value of its current investment portfolio across 320 companies is $1.25 billion. This includes 10 direct investments and a large number of those, which were invested in by PE funds which raised funds from CDC.
It has already provided $50 million debt capital to Janalakshmi Financial Services and $25 million Equitas Holdings. Other SFB licence-holders from its portfolio include Utkarsh Finance, Ujjivan Financial Services and Au Financiers. It also has direct investment in RBL Bank where it could have an opportunity to provide debt capital.
“We will make sure that our existing investee companies, all six of them, are supported first. If there are more opportunities, we will also look at them,” says Srinivasan. Apart from investments in financial service, CDC is also evaluating opportunities in companies from health care, consumer, industrial and infrastructure.
The International Finance Corporation and the Asian Development Bank are other global institutions, which are interested in investment opportunities with the upcoming SFBs.
Apart from investments in financial service, CDC is also evaluating opportunities in companies from healthcare, consumer, industrial and infra. Its investment thesis includes support to companies, which operate in underdeveloped areas of the country and help eradicate poverty. Other direct investments for CDC include Narayana Hrudayalaya, Rainbow Hospitals and Pristine Logistics. It is also an investor in German firm Rocket Internet, which has fashion e-tail venture Jabong in India. It is now looking for investment opportunities in the infrastructure space especially solar and wind power.
UPCOMING SFBs
In 2012, the development finance bank shifted its focus on direct investments from fund of funds strategy it had been playing till then. It plans to invest $750 million in India in the next three years, and a majority will be through direct investment in both equity and debt opportunities.
It did not provide its absolute investment amount in India in three decades of its existence in the country. The value of its current investment portfolio across 320 companies is $1.25 billion. This includes 10 direct investments and a large number of those, which were invested in by PE funds which raised funds from CDC.
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“Not many institutions in this country are able to provide Tier-II capital to these upcoming banks because they do not have the appetite for this subordinate instrument,” says N Srinivasan, head, South Asia, for CDC India Advisors. “They are not able to provide it because they might need to set it off against their capital. But, for us, it fulfils our additionality thesis, which requires us to invest in way that we do not crowd out other private equity investors,” he says. As CDC uses the fund of funds route also, it is a limited partner in many of these PE funds.
It has already provided $50 million debt capital to Janalakshmi Financial Services and $25 million Equitas Holdings. Other SFB licence-holders from its portfolio include Utkarsh Finance, Ujjivan Financial Services and Au Financiers. It also has direct investment in RBL Bank where it could have an opportunity to provide debt capital.
“We will make sure that our existing investee companies, all six of them, are supported first. If there are more opportunities, we will also look at them,” says Srinivasan. Apart from investments in financial service, CDC is also evaluating opportunities in companies from health care, consumer, industrial and infrastructure.
The International Finance Corporation and the Asian Development Bank are other global institutions, which are interested in investment opportunities with the upcoming SFBs.
Apart from investments in financial service, CDC is also evaluating opportunities in companies from healthcare, consumer, industrial and infra. Its investment thesis includes support to companies, which operate in underdeveloped areas of the country and help eradicate poverty. Other direct investments for CDC include Narayana Hrudayalaya, Rainbow Hospitals and Pristine Logistics. It is also an investor in German firm Rocket Internet, which has fashion e-tail venture Jabong in India. It is now looking for investment opportunities in the infrastructure space especially solar and wind power.
UPCOMING SFBs
- Au Financiers
- Capital Local Area Bank
- Disha Microfin
- Equitas Holdings
- ESAF Microfinance and Investments
- Janalakshmi Financial Services
- RGVN (North East) Microfinance
- Suryoday Micro Finance Private
- Ujjivan Financial Services
- Utkarsh Micro Finance