Temasek Pumping More Money Into India's Micro Financing Market

Temasek To Invest Rs 300 Cr (US$60 Mil) In India's Micro Finance Institution Spandana Sphoorty Financial Ltd

http://www.vccircle.com/500/news/temasek-to-close-rs-300-cr-investment-in-spandana

Vvcircle.com, 3 Sep 2009

Temasek To Close Rs 300 Cr Investment In Spandana

Singapore government-sponsored investment house Temasek Holdings is close to investing $60 million or Rs 300 crore in Hyderabad based Spandana Sphoorty Financial Ltd. According to sources, the deal is being closed at $400 million or Rs 2,000 crore valuation.

VCCircle had reported last week, quoting Spandana's CEO Padmaja Reddy, that the microfinance institution would be closing a $60 million deal this week. When contacted, Manish Kejriwal, Senior Investment Director, India & International, Temasek Holdings, told VCCircle, “We haven’t closed the deal.” Reddy was not available for a comment.

If the deal goes through, this would be third investment by Temasek in financial services space. It had earlier invested in non banking financial services company Fullerton India and also in ICICI Bank.

In Spandana, Temasek could be buying out half the stake of Lok Capital, which holds 5% stake in Spandana. Lok Capital is looking at divesting 50% of its interest, Reddy had told VCCircle last week. The other stakeholders in Spandana include JM Financial PE fund (18%), Valiant (11%) and senior employees (15%).

Spandana, like many other MFIs like SKS Microfinance, has been aggressive on the capital-raising front. It has already raised debt to fund its growth plans. In June, it raised Rs 80 crore via non-convertible debentures. Also, it recently concluded Rs 50-crore ($12 million) loan deal with Rabo Bank, a Dutch cooperative.

Private equity and venture capital investors have taken a serious shine to the MFI sector, although there is a refrain that the sector is overvalued.

Earlier this year, SKS Microfinance raised Rs 75 crore ($15.8 million) through a one-year non-convertible debenture issue at a coupon rate of 10%. In late 2008, SKS raised Rs 366 crore ($75 million) with investments from Sandstone Capital, Kismet Capital and SVB India Capital partners. Fellow Andhra Pradesh MFI player Share Microfin is also in the process of raising $50 million from International Finance Corporation, the private equity fund of World Bank, and others. In April, Bhartiya Samruddhi Finance Ltd raised $10 million.

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Asia
HOME > BREAKING NEWS > ASIA > STORY

Dec 3, 2009
$1.4b loan to clean Ganges

The World Bank has agreed to loan India US$1 billion (S$1.4 billion) to help clean the Ganges river, sacred to hundred of millions of Hindus and also one of the most polluted rivers in the world. -- PHOTO: AFP

NEW DELHI - THE World Bank has agreed to loan India US$1 billion (S$1.4 billion) to help clean the Ganges river, sacred to hundred of millions of Hindus and also one of the most polluted rivers in the world.

'The bank would be honoured to help and support India's renewed endeavor to revitalise this uniquely important river,' World Bank President Robert Zoellick said.

The loan to clean up the 2,490-kilometre river will be spread over the next five years, he said in a statement released late Wednesday.

Scientists say massive amounts of human and chemical waste have devastated the river, which spills from a Himalayan glacier and cuts through India's plains before flowing into the Bay of Bengal.

Earlier this year the Indian government set up a National Ganga River Basin Authority as part of a plan to ensure that by 2020 no untreated sewage or effluents will be discharged into the river. The government estimates that nearly $4 billion will be required to meet the target.

More than 350 million people across several Indian states live in the river's watershed. -- AP

Home > Breaking News > Asia > Story
Sep 23, 2009
US$4.3b loan for India
WASHINGTON - THE World Bank on Tuesday announced US$4.3 billion (S$6.06 billion) in loans to India, including US$2 billion for the banking sector, to help strengthen its economy amid the global economic crisis.

LOAN IS FOR 30 YEARS
THE loan is for 30 years and includes a five-year grace period in which India is exempt from repayments.


A 28-year loan of US$1.195 billion was aimed at increasing the availability of long-term financing for the India Infrastructure Finance Company to provide public-private financing of infrastructure projects.
... more
The World Bank said its executive board approved loans for projects in five countries, with the loans for India by far the largest.
The four projects worth US$4.3 billion to India are 'designed to support the government's infrastructure agenda and bolster its economic stimulus program,' the Washington-based development lender said.

The bank noted that after a period of high economic growth - which reached 9.7 per cent in 2006-07 - the onset of the global financial crisis in 2008 saw a decline in India's growth rate to about 5.0-6.0 per cent in the fourth quarter of 2008-2009.

The bank projected a 'realistic' growth rate of between 5.5 and 6.5 per cent for 2009-2010 for Asia's third-largest economy, after Japan and China.

'This is a crucial time to support India,' Roberto Zagha, World Bank country director for India, said in a statement.

'While the worst of the crisis seems to be behind us, doubts linger about the strength of the comeback, partly because the strength of the global recovery is uncertain. Today's support will help maintain credit growth and continued infrastructure investments,' he said.

Mr Zagha said supporting infrastructure development was crucial to 'lay the foundations for stronger future growth.'

The World Bank said it had extended a two-billion-dollar loan to support the banking sector, in response to a request from the Indian government to support stimulus measures to counter the worst global downturn in six decades.

'This will help maintain the confidence of the public in the banking sector, prevent shortages of capital from leading to a slowdown in credit growth, and provide a capital buffer to public sector banks to absorb the possible increase in non-performing assets resulting from the global financial crisis and its impact on India's economy,' it said. -- AFP

Fullerton India set to wind up sub-prime lending
December 17, 2009 07:25 PM |
Sucheta Dalal & Yogesh Sapkale

When the liquidity crunch began, some of the large NBFCs found themselves squeezed by rising defaults as well as ballooning collection costs, forcing them to scale down operations.

Fullerton India Credit Co Ltd, an indirect subsidiary of Singapore-based Temasek Holdings, was among the last financiers still willing to bet on India's sub-prime or unsecured borrowers. According to sources, it is now set to join the ranks of Citi Financial, GE Money, ICICI Bank and others who have bailed out of this market because of losses suffered due to the difficulty in loan recovery.
The exit of these lenders has however deprived a big segment of the low-income market, which comprised tiny, independent entrepreneurs.

The root cause of the demise of this business is the misbehaviour of recovery agents which led to a few suicides and attracted enormous bad press. This led to police action against the lenders as well as warnings of stringent penalties by the Reserve Bank of India. Another big setback in the recovery process is the lack of sympathy for lenders from the judiciary as well. Some finance companies had attempted to dispense with uncouth recovery agents and use the judicial route (filing Sec 138 complaints against cheque bouncing); however, this only meant long delays, high legal costs and judges who would not look at the entire repayment but focus on specific bounced cheques. Clearly, this route too was unworkable and created an environment where it was an advantage for borrowers to fudge and default on repayments.

While many exited the business, those like Indiabulls, Bajaj Finance, Shriram City Union Finance and Fullerton India had attempted to struggle on for a while. When the liquidity crunch began, these large players found themselves squeezed by rising defaults as well as ballooning collection costs, forcing a few to scale down operations.

During FY09, Citi Financial brought down its branch network from 450 to 170 branches, while GE Money reduced its branches from 180 to 80. Earlier in March, Fullerton India gave pink slips to nearly 3,000 employees (20% of its workforce) and also shut down around 50 branches owing to the liquidity crisis. At that time, the credit company had 800 branches across the country and employed around 14,000 people.

As of March 2009, Fullerton India had disbursed about Rs5,000 crore and had an asset book of Rs2,500 crore. About 70% of Fullerton India\'s lending portfolio constitutes loans to the self-employed segment; the remainder consists of loans to salaried individuals and two-wheeler loans.

Fullerton India provides financial support to customers through Fullerton India Parivaar and Fullerton India Vyapaar. Fullerton India Parivaar caters to the needs of salaried individuals while Fullerton Vyapaar provides finances to self-employed people in small and basic businesses.

In October 2009, Fullerton India appointed Ruben de la Mora as its chief executive and managing director, replacing GS Sundararajan. Mr Sundararajan was instrumental in leading a team of professionals at Fullerton India in building from scratch a network of over 800 branches across 400 towns and cities with over 12,000 employees.

Here I spawn .