Project detail - Equitas Holdings Private Limited

Who is our customer

Equitas Holdings Private Limited is a rapidly growing and well performing holding company with total assets of US$335 mln (30th June 2013). The company is also highly committed to environmental, social and governance issues. The company's core business is financing micro-entrepreneurs with limited access to formal credit channels. Through three wholly-owned non-bank financial institution (NBFI) subsidiaries, it offers: (i) micro-loans through the group-loan model to women micro-entrepreneurs; (ii) commercial vehicle loans to under-banked individuals and companies; and (iii) affordable housing loans to the self-employed segment of the population.

What is our funding objective?

FMO invested US$9.3 mln for a stake of 5.1% in Equitas. Equitas specifically prefers funding from development finance institutions such as FMO, which it believes to have perfect alignment with its development mission and social impact goals. Thus, FMO, with its long-term investment horizons and social development objective, fits perfectly with the company's long-term ambitions, and will therefore invest the entire capital raise amount of Equitas. After the microfinance crisis in 2011 which resulted in bankruptcies of several microfinance institutions (MFIs) and losses for funding entities, the appetite to invest equity by PE funds and other parties is very limited. It is expected this will recover when companies like Equitas and Ujjivan continue to show good results. The subordinated loan to Equitas MFI (2011) and projected loan to Equitas VF (2013) have a similar positive impact. Equity infusion in Tier I capital will enable Equitas to realize additional debt funding and to grow their loan book.

Why do we fund this investment?

FMO's investment together with partner CDC, fits well with Equitas' long-term growth ambitions and its overall social development objectives. Along with a good projected IRR for FMO at the time of exit, as part of the Equitas 'ecosystem', the company has two not-for-profit organizations (Equitas Dhyanakosha and Equitas Development Initiatives Trust) dedicated to four impact-building measures: skill development, food security, health and education. The company contributes a minimum of 5% of its net profit (11% in FY2013) towards these initiatives, and has thus far served a total of 1.3 million members in its health initiatives, is teaching 3,895 students through its schools and tuition centers and provided vocational training (in small-scale self-independent vocations) to 270,000 members. Through its food security project, Equitas provides basic groceries at a 8%-10% discount from retail rates to its MFI members, each of whom are provided a rolling, interest free credit of INR 1,000 (US$19) for the same.