In the beginning of March FMO exited just over half of its equity stake in Ujjivan Financial Services to CX Partners and Newquest Capital. Our investment supported the Indian micro-finance industry when such support was in very short supply after the micro-finance crisis in 2010.
After the crisis, Ujjivan emerged as one of the largest and most successful micro-finance institutions in India, thanks, at least in part, to FMO’s timely post-crisis equity infusion. Since FMO’s entry in January 2012 Ujjivan grew its assets from US$160 mln to US$430 mln and its borrower base from just over a million customers to well in excess of two million customers today. They have reduced costs and substantially improved profitability, without sacrificing asset quality – all that in the challenging context of an increasingly strictly regulated micro-finance industry in India with interest rate and margin caps.
CX Partners and Newquest Capital
CX Partners is a reputable growth equity PE fund manager in India and Newquest Capital is an Asian secondaries fund manager. Both organizations are enthusiastic supporters of Ujjivan’s next growth phase. FMO's sale to CX Partners and Newquest is part of a larger transaction: shares of six existing investors worth a grand total of US$50 mln changed hands, and maybe more significantly, Ujjivan raised US$50 mln in new equity subscriptions, taken up by existing investors IFC and Elevar, and new investors like CDC, CX Partners and domestic investor Bajaj Capital, which infusion will support further growth of Ujjivan's loan book.
FMO's remaining stake in Ujjivan
We have partially sold our stake and we believe that there is ample potential for further growth and equity upside in the future. We closely observe exciting things happening in the Indian micro-finance space. The new government focuses on increased inclusion and a new kind of bank license, so called ‘small banking license’ to be granted to some Indian institutions - Ujjivan being one of the applicants.
