32284 - Equitas

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Summary of Investment Information

Project Number

32284

Company Name

Equitas Holdings Limited

Date SPI Disclosed

May 4, 2012

Country

India

Region

South Asia

Projected Board Date

Jun 13, 2012

Environmental Category

FI-3 - No Impact

Status

Active

Last Updated Date

Nov 30, 2016

Department

Global Industry, Financial Markets

Industry

Financial Markets

Previous Events

Approved : Jun 21, 2012
Signed : Jun 25, 2012
Invested : Oct 4, 2012

Sector

Microfinance and Small Business - Non Commercial Banking

Project Description

The proposed project envisages an equity investment in Equitas Holdings Private Limited (“Equitas” or the “Company”) which is the holding company for a leading microfinance institution, Singhivi Investment and Finance Private Limited (“Equitas Microfinance”) headquartered in Chennai, India and amongst the top 10 MFIs in India. Equitas Microfinance has a borrower base of 1.2 million across 5 states and 1 union territory including the Low Income States of Rajasthan and Madhya Pradesh. Equitas has also started recently businesses in the areas of affordable housing (“Equitas Housing Finance Private Limited”) and used commercial vehicle financing (“Equitas Finance Private Limited”) to cater to the relatively unbanked population in these financial services segments with a view towards financial inclusion.

Equitas is widely acknowledged for following best practices in responsible financing and corporate governance. Equitas also has a strong focus on using technology and process innovation to increase operational efficiency through implementation of a scalable system for IT infrastructure.

The proposed project intends to help Equitas fund its geographical expansion, scale up new businesses and meet its regulatory capital adequacy requirements for the next 3-5 years

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan
Equity	17.81

Development Impact

1. Access to Microfinance by expanding the outreach of Equitas in several of the poorer states in India, where the Company would scale up in the next few years.
2. Access to Finance for Affordable Housing and Used Commercial Vehicle Financing to people engaged in the informal sector for affordable housing and used commercial vehicle financing, several of whom are currently underserved by the formal banking system. Clients who avail finance for purchase of second hand commercial vehicles would be able to open up a livelihood opportunity for themselves and their families and turn from being a driver to an owner. The housing finance company helps people who run businesses in the informal sector to plan for and buy a house at current prices. Typically such people are almost fully excluded from the formal financial sector.
3. Promoting a more balanced growth of microfinance by supporting an institution that has been a front-runner in adopting technology, is amongst the pioneers in best practices on responsible financing, takes a very active part in sector development and is working to provide varied financial services to customer segments which have limited access to formal sources of finance.

1. Institution Building: IFC''s assistance would help Equitas in its expansion in the low income states and help the company to further reduce cost of intermediation, achieve higher client outreach, offer diversified products as well as build best practices in the areas of risk management and responsible financing.
2. Demonstration Effect: IFC''s entry is expected to build confidence in the Microfinance sector and have a demonstration impact by catalyzing other investors, network partners and stakeholders to support Equitas''s expansion over the medium term. IFC''s investment would underline the faith in the sustainability of the microfinance business post the changed regulatory environment in addition to building investor confidence in the low income states towards provision of financial services to the BoP.
3. Diversification of Funding: IFC''s investment will help the Company diversify sources of funding by providing comfort to potential lenders and investors. This investment is expected to help the company broad base its profile of investors with long term perspectives.

E&S Category Rationale / Risks and Mitigation

This transaction involves an equity investment and the overall portfolio risk is considered to be low. The project has therefore been categorized as FI-3 in accordance with IFC’s Environmental and Social Review Procedure.

Equitas provides micro-finance (~88% of portfolio); housing finance (~1%) and commercial vehicle finance (11% of portfolio). Micro-finance is typically provided for small traders (vegetable vendors, hawkers, small grocery shops), cattle purchase, small businesses such as tailoring, informal activities such as housemaids and piece rate workers, support work in companies (housekeeping etc.). Housing loans are being extended mainly for self-employed persons or persons employed in the unorganized sector, intending to construct or extend housing for self/family.

These lending activities entail minimal or no adverse environmental or social risks and/or impacts. For this project the client will be required to screen loans against the IFC Exclusion List and the Indian E&S laws and regulations.

Contacts

For Inquiries About the Project, Contact

P.N. Vasudevan
mailto:vasudevanpn@equitas.in

Equitas Holdings Private Limited
4th Floor, Temple Towers
No. 672, Anna Salai, Nandanam,
Chennai, Tamil Nadu,
India - 600035

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