PE Tech Report

NEWSLETTER

Like this article?

Sign up to our free newsletter

Indian microfinance provider Ujjivan raises USD19.6m from private equity investors

Bangalore, India-based microfinance institution Ujjivan Financial Services has announced the completion of its fourth round of equity capital-raising, which was originally planned for USD1

Bangalore, India-based microfinance institution Ujjivan Financial Services has announced the completion of its fourth round of equity capital-raising, which was originally planned for USD15.6m but was over-subscribed and increased to USD19.6m.

The fresh capital was largely subscribed by existing shareholders including Unitus Equity Fund managed by Elevar Equity, Bellwether Microfinance Fund, the Michael & Susan Dell Foundation, A.W. Holdings and individual investors including promoter and chief executive Samit Ghosh.

The five new investors in the private placement transaction are Sequoia Capital, Lok Capital, Unitus Equity Fund II, India Financial Inclusion Fund and SIDBI. The additional capital brings Ujjivan’s paid-up capital and reserves to more than USD22.5m.

‘Ujjivan has expanded its institutional investor base to create a balance between social and market-driven private equity investors to ensure that that its social mission is not diluted but at the same time it can maintain the ambitious growth plans,’ Ghosh says.

‘We are very pleased to receive the unwavering support of the existing and new investors even in these challenging times. It is a testament to the future of the microfinance industry in India.’

Ujjivan, in collaboration with Bellwether Microfinance Fund and Unitus Equity Fund, was able to offer its individual investors liquidity by offering to buy out part or all of their investment. The firm says this is the first time a microfinance institution has been able to offer a market-determined exit to individual investors and will go a long way toward creating a secondary market for shares of microfinance companies.

‘Creating a secondary market for microfinance institutions’ stock is one more critical step in integrating microfinance into capital markets and in some sense reflects coming of age of this asset class,’ says S. Viswanatha Prasad, managing director of the Bellwether Microfinance Fund and Caspian Advisors.

‘Bellwether is delighted to have taken this lead role in the Indian market to provide liquidity to the investors in Ujjivan. Bellwether and the India Financial Inclusion Fund are excited to be part of Ujjivan’s growth plans and are confident of its success.’

Elevar Equity managing director Sandeep Farias says: ‘Ujjivan’s exceptional performance as a microfinance institution that has balanced commercial performance with social impact makes us proud to continue our association, and we have invested from UEF II as well. We are confident that Ujjivan will benefit from the partnerships it has formed through this round of investment.’

Royston Braganza, chief executive of Grameen Capital India, the equity advisor for the transaction, adds: ‘Ujjivan’s success is a strong indication of growing confidence from the investor community in microfinance as an asset class. Ujjivan offers a financially sound as well as socially motivated growth strategy for meeting the vast unmet demand for microfinance.’

Ujjivan Financial Services, a partner of Grameen Bank of Bangladesh that focuses on serving the urban and semi-urban poor, completed its third year of operation in November. It now has 100 branches in eight Indian states with more than 165,000 customers, has disbursed USD32m in loans and enjoys a repayment rate of 99.5 per cent.

Grameen Capital India enables microfinance institutions to develop wider access to the capital markets, primarily domestically, through debt and equity solutions, credit rating enhancement arrangements and capital advisory services, with the ultimate aim of reducing the cost of capital. Grameen Capital India is a collaboration between Grameen Foundation, IFMR Trust and Citicorp Finance India.

Like this article? Sign up to our free newsletter

MOST POPULAR

FURTHER READING

Featured

Blackstone Private Equity