36347 - Tata SME Rural

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Summary of Investment Information

Project Number

36347

Company Name

TATA CAPITAL FINANCIAL SERVICES LIMITED

Date SPI Disclosed

Nov 3, 2015

Country

India

Region

South Asia

Projected Board Date

Dec 17, 2015

Environmental Category

FI-3 - No Impact

Status

Completed

Last Updated Date

Mar 11, 2022

Department

Regional Industry - FIG Asia & Pac

Industry

Financial Markets

Previous Events

Approved : May 13, 2016
Signed : May 31, 2016
Invested : Dec 28, 2016

Sector

Finance Companies

Project Description

Tata
Tata Capital Financial Services Limited (“Company” or “TCFSL”) is a wholly owned subsidiary of Tata Capital Limited (“TCL”) and is a Systemically Important Non Deposit Accepting Non Banking Financial Company (“NBFC”), holding a Certificate of Registration from the Reserve Bank of India (“RBI”), dated November 4, 2011. The Company has critical scale and is amongst the top 10 private sector NBFCs offering fund and fee-based financial services to its customers, under the Tata Capital brand. A trusted and customer- centric, one-stop financial services provider, TCFSL caters to the diverse needs of retail, corporate and institutional customers, across various areas of business namely the Commercial Finance, Infrastructure Finance, Wealth Management, Consumer Loans and distribution and marketing of Tata Cards.

IFC proposes to provide local currency funding to TCFSL by subscribing to non-convertible debentures (NCD) to be issued by the Company. The proceeds of the IFC financing will be channelized to farmers in rural areas for financing tractors and other agricultural equipment. The aforementioned segments have limited access to finance from the organized sector (the “Project”).

Associated Advisory Engagement

N/A

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	41.0
Equity

IFC's loan to the financial institution described in this SII is targeted for on-lending to the following sector(s):

Product Type	Use of Proceeds
Straight Senior Loan	Loans to SME Borrowers

IFC's Definitions of Targeted Sectors can be found here.

Development Impact

1. Additional Reach: TCFSL''s strategy is to serve farmers in rural areas for financing tractors and other agricultural equipment. TCFSL has a unique ability to penetrate these customer segments thanks to the Tata brand. The Tata brand is very strong in rural and semi-urban markets. Availability of additional financing for agriculture is very important to the Indian economy given the challenges of improving India''s food security situation. The increase in population as well as disposable incomes in rural and semi-urban areas generate a rapid increase in food consumption demand.
2. Pan-Indian Presence and Expert in niche markets: TCFSL is the appropriate partner for IFC to provide financing to under-served segment of the market as the Company is present across all India. Banks focus on larger, more traditional clients and consumer finance whilst the NBFCs tend to focus more on asset finance which is essential for rural equipment financing.
3. Cross- selling products: TCFSL gives the opportunity to cross-sell services of the other group companies subject to applicable regulations and is an ideal development partner for IFC as we explore ways with TCFSL to offer financial services and products to this target customer base, either directly via TCFSL or via other delivery channels.

1. Broadening IFC''s Strategic Relationship with Tata Capital Limited (TCL), parent of TCFSL: The Project broadens the strategic relationship with Tata Capital. IFC has two joint ventures with Tata Capital, Tata Cleantech Capital Limited and India Collections Management Limited (ICML). Tata Cleantech Capital Limited is the first green field environment finance company in emerging markets. It is in the process of being converted into a specialized infrastructure finance company to take advantage of the broader opportunities that are emerging in anticipation of the reforms to address operational constraints in the development of infrastructure projects in India. ICML, which was set up to be a specialized collections company, could not commence operations due to certain issues, and IFC and Tata Capital have mutually decided to wind up ICML. The collaboration provided by TCL to IFC through this difficult period has been nothing short of exemplary, and is a testimony of an excellent relationship with IFC. Tata Capital Ltd and IFC continue to look for other interesting and mutually beneficial joint opportunities including in the payments space.
2. Funding diversification: Most NBFCs are reliant to large extent on bank borrowings. IFC''s investment would allow TCFSL to meet its funding requirements from a diversified source and assist in reducing bank borrowings. TCFSL welcomes IFC as an investor in its NCDs as it is an important market signal.
3. Development Impact Tracking System: TCFSL would like to improve their measurements of the development impacts of their own activities. They would like IFC to help them design their internal system

E&S Category Rationale / Risks and Mitigation

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