39031 - Capital First Limited BOW NCD

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Summary of Investment Information

Project Number

39031

Company Name

IDFC FIRST BANK LIMITED

Date SPI Disclosed

Apr 21, 2017

Country

India

Region

South Asia

Projected Board Date

May 30, 2017

Environmental Category

FI-2 - Limited

Status

Completed

Last Updated Date

Jun 11, 2022

Department

Regional Industry - FIG Asia & Pac

Industry

Financial Markets

Previous Events

Approved : May 25, 2017
Signed : May 31, 2017
Invested : May 4, 2018

Sector

Finance Companies

Additional Project Attributes

Blended Finance

Project Description

The project involves IFC financing of up to INR 3.4 billion (US$50 million equivalent) to Capital First Limited (“CFL” or the “Company”), a Systemically Important Non-Deposit Accepting Non-Banking Financial Company in India. The funding will be used for financing the growth of CFL’s lending portfolio to women-owned small and medium enterprises (“WSMEs”). This investment is part of IFC’s strategic target to reach 10 million MSMEs during FY17-21.

CFL serves micro, small and medium enterprises (“MSMEs”) and fast-growing emerging middle class consumers in India. It has a highly diversified loan book of INR 188.00 billion (US$2.8 billion equivalent) as of December 31, 2016, of which 91% consists of MSME and consumer financing. The Company has financed 3.5 million customers to-date in 222 locations, including low-income states, across India.

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	52.86
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. Access to finance for women-owned SMEs: CFL is a good partner for IFC in its efforts to support women-owned SMEs in India given the Company's leading position in the MSME market, including a strong presence in low-income states. Capital First has a strong interest in financing women-owned businesses and can effectively channel IFC's funding to women borrowers across India. Increased availability of well-allocated financial resources will help WSMEs grow and stabilize their businesses, create more jobs and contribute more effectively to boosting productive economic activity. 2. Demonstration effect: This investment will be IFC's first Banking On Women project to be undertaken with an NBFC, thus further solidifying women entrepreneur financing as a sustainable and attractive proposition for financial institutions, and is expected to provide a demonstration effect for other NBFCs in India and elsewhere throughout emerging markets.

1. Strategic Partner: IFC is an ideal strategic partner for the Company, whose mission to finance India's 50 million MSMEs and its emerging middle class, is consistent with IFC's priorities in the region. In the first IFC investment, IFC assisted the Company in strengthening its E&S risk management procedures. A partnership with IFC can help Capital First to continue to innovate and implement best practices. 2. Diversification of funding sources: IFC's investment would help CFL in executing its strategy to further diversify its funding and reduce reliance on bank borrowings. 3. Knowledge and Innovation: Banking on Women component: IFC is a source of expertise and experience that will help the Company identify and develop the WSME segment as a future high growth line of business. IFC and CFL are discussing a potential IFC advisory services project, which would help CFL strengthen its value proposition and business case for women entrepreneurs.

E&S Category Rationale / Risks and Mitigation

IFC proposes to subscribe theNCD of Capital First Limited which is an existing client of IFC. The NCD proceeds will be used for onlending to women owned enterprises in the MSME segment. The MSMEs portfolio is exposed to medium risk sectors like machinery, industrial and transport equipment, manufacturing and fabrication. Given the use of NCD proceeds, the overall E&S risks and impacts are of low-medium level and hence the project is categorized as FI-2. The E&S requirements comprise IFC Exclusion List and national E&S laws and regulations as applicable to the MSME sector.

The main E&S risks and impacts of the project relate to occupation health and safety, labor and working conditions and pollution aspects at the MSMEs facilities. Most of these risks are manageable through adequate implementation of national laws and good industry practices. The Company is implementing an E&S risk management process requiring screening against IFC exclusion list and key E&S laws and regulation of the country as applicable to the MSME borrowers. The Company has appointed a senior officer as its SEMS officer. The Company will further provide training to its staff to further strengthen implementation of the E&S management system.

Contacts

For Inquiries About the Project, Contact

Capital First Limited
Saptarshi Bapari
Head – Strategic Initiatives & Investor Relations
+91 (22) 4042 3400
saptarshi.bapari@capitalfirst.com
One Indiabulls Centre, Tower 2A & 2B, 10th floor, Senapati Bapat Marg, Lower Parel (W), Mumbai
www.capitalfirst.com

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Task Title & Description	Anticipated Completion Date
Staff Training	10/19/2017

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