42373 - DCM MMFSL II

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Summary of Investment Information

Project Number

42373

Company Name

MAHINDRA AND MAHINDRA FINANCIAL SERVICES LIMITED

Date SPI Disclosed

Apr 19, 2019

Country

India

Region

South Asia

Projected Board Date

May 20, 2019

Environmental Category

FI-2 - Limited

Status

Completed

Last Updated Date

Dec 8, 2023

Department

Regional Industry - FIG Asia & Pac

Industry

Financial Markets

Previous Events

Approved : Jun 10, 2019
Signed : Nov 19, 2019
Invested : Nov 27, 2019

Sector

Other Non-Banking Financial Institution (NBFI)

Additional Project Attributes

Blended Finance

Project Description

The proposed investment comprises a 3-year senior, secured funding of up to INR5,250M or US$75M to Mahindra & Mahindra Financial Services Limited (“MMFSL” or the “Company”). IFC’s investment will support the Micro, small and medium enterprises (MSMEs) including Very Small Enterprises (VSEs) segment in India by helping MMFSL augment its lending program to these enterprises. MSMEs and VSEs includes financing towards agricultural sector and the proposed investment will be on lent primarily to finance a range of agricultural equipment, utility and commercial vehicles. At least 50% of the proceeds are expected to be earmarked towards women owned SMEs including VSEs, and the remaining for growth of these segments in the low-Income states (LIS) of India. In addition, the Company has agreed to allocate an amount equal to 3 times IFC’s loan amount from its own balance sheet / other sources of funds to on lend to the MSME segment including VSE in LIS. The company will endeavor to disburse this amount during the period of this loan.

MMFSL is a rural focused NBFC, and the financial services arm of the Mahindra and Mahindra (“M&M” or the “parent”) group. The Company offers a wide range of customized financial products to address its rural customer requirements. The Company’s business lines include vehicle and tractor loans, SME loans as well as fixed deposits products. As of December 31, 2018, MMFSL’s AUM stood at INR582B (US$8.3B) and equity at INR103B (US$1.5B). IFC may also mobilize additional funding from other investors for the project.

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	75.0
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 MSME (mix of Micro and SME)
Straight Senior Loan	Loans to Woman-Owned SMEs

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

Development Impact

1. Stakeholders impact: The project is expected to improve access to finance for the MSME sector particularly women owned enterprises and those enterprises in LIS, by earmarking the proceeds towards these segments. It would also support formal job creation by contributing to improvement in economic activity. 2. Market Impact: The funding to LIS will enable greater financial inclusion in these states which are the poorest states in the country with significantly low penetration of financial services. In addition, focused funding towards women owned enterprises will encourage economic participation and empowerment of women. The success of this investment is expected to encourage further market development.

1. Dedicated Funding to the MSME and VSE sector: Given the overall funding constraints experienced by MSME/VSEs, particularly those owned by women / in LIS, this investment along with potential future mobilization will provide much needed focused funding towards these critical segments. 2. Knowledge, innovation and capacity building: IFC, through its global experience, will work with the company to create a program within MMFSL focused and tailored around rural women borrower needs in India.

E&S Category Rationale / Risks and Mitigation

This project entails an IFC loan to Mahindra & Mahindra Financial Services Limited, which is primarily in the business of financing purchases of new and pre-owned auto and utility vehicles, tractors, cars, commercial vehicles, and construction equipment. The overall E&S risks of the portfolio activities to be supported by this project is limited and the project has therefore been classified as a Category FI-2 project according to IFC Policy on Environmental and Social Sustainability. The E&S requirements comprise IFC Exclusion List and national E&S laws and regulations as applicable to the company.

The main E&S risks and impacts of the project derive from the E&S risks of the company's financing activities and its capacity and system in place to manage such risks, as well as the company's own practice with regard to labor and working conditions. The Company has developed an E&S management system (ESMS) commensurate with its lending activities to achieve compliance with the above requirements. It will be required to maintain proper E&S capacity and continue to implement the ESMS. The company's labor practice was found to be generally consistent with the requirements of IFC Performance Standard 2 on Labor and Working conditions.

Contacts

For Inquiries About the Project, Contact

Mahindra & Mahindra Financial Services Limited
Mr. Vishal Agarwal
Deputy General Manager-Treasury & Investor Relations
+91 22 66526000

Dr. G. M. Bhosale Marg (Worli), Mumbai - 400018, India

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This Summary of Investment Information (SII) is prepared by IFC to disclose a factual summary of the main elements of the potential investment. It also includes findings and recommendations related to environmental and social considerations regarding this potential investment. The purpose of the SII is to enhance the transparency of IFC’s activities. For any project documentation or data included or attached herein, whether prepared by the project sponsor or otherwise, authorization has been given for public release by the project sponsor. IFC considers that this SII is of adequate quality for release to the public, but has not necessarily independently verified all of the project information therein. It is distributed in advance of IFC Board of Directors’ consideration and may be periodically updated thereafter. Board dates are estimates only and this document should not be construed as presuming the outcome of the Board Directors’ decision. The following SII is disclosed in accordance with IFC's Access to Information Policy (AIP) that went into effect on January 1, 2012.

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