43960 - Fullerton Loan

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Summary of Investment Information

Project Number

43960

Company Name

SMFG INDIA CREDIT COMPANY LIMITED

Date SPI Disclosed

May 28, 2020

Country

India

Region

South Asia

Projected Board Date

Jun 28, 2020

Environmental Category

FI-2 - Limited

Status

Active

Last Updated Date

Nov 19, 2021

Department

Regional Industry - FIG Asia & Pac

Industry

Financial Markets

Previous Events

Approved : Jun 30, 2020
Signed : Jun 30, 2021
Invested : Nov 17, 2021

Sector

Other Non-Banking Financial Institution (NBFI)

Project Description

The proposed project comprised a senior secured debt funding of up to $100mn to Fullerton India Credit Company Ltd (“FICCL” or the “Company”). The purpose of the proposed IFC investment is to support the Company's lending program to micro, small and medium enterprises (“MSMEs”) in India, especially in Low-Income States (“LIS”), and also to women entrepreneurs.

FICCL is a diversified MSME-focused non-banking finance company (“NBFC”) headquartered in Mumbai. It has 648 branches and is present in over 58,000 thousand villages in India. As of end December 2019, FICCL’s loan portfolio stood at INR247 billion (US$3.3 billion). Gross non-performing assets (“NPA”) stood at 2.6% and net NPA at 1.4%. The Company’s annualized return on assets and return on equity stood at 3.6% and 20.2% respectively for the first three quarters of FY20.

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	100.0
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)

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

Development Impact

Stakeholder Effects: The project is expected to contribute positively to job creation by improving access to finance for MSMEs in the low-income states of India. Further, IFC anticipates the project to support FICCL in increasing its lending to women owned MSMEs. Market Impact: The implementation of the proposed project will support the continued flow of credit to the MSME sector. The financing provided to FICCL and similar MSME focused NBFCs is critical for the livelihood of the customers found in the MSME segment. FICCL will be primarily catering to the need of the additional first-time borrowers who entered the market and will be demonstrating the financial viability of serving the unserved segment, especially the entrepreneurs, including women, in the low-income states.

(i) Financing Structure: This project will help FICCL increase diversification in the sources and tenor of funding to better manage asset liability mismatches; (ii) By investing in an NBFC, such as FICCL, during a period of uncertainty, IFC is providing a significant vote of confidence to NBFCs in general, thus providing comfort to the companies themselves and to the investor community at large and bringing back market confidence and ensuring credit flows to the MSME segment.

E&S Category Rationale / Risks and Mitigation

The project entails a debt investment of up to $ 100 million in Fullerton India Credit Company Ltd. (“FICCL” or “company”) for providing finance to MSMEs in low income states across India. The project presents medium-low E&S risks and impacts which are readily manageable. The project will not support coal-related activities and higher risk business activities that may involve a) involuntary resettlement, b) risk of adverse impacts on Indigenous Peoples, c) significant risks to or impacts on the environment, community health and safety, biodiversity, cultural heritage or d) significant Occupational Health and Safety risks. Hence, the project is categorized as Category FI-2 in accordance with IFC Sustainability Policy. The E&S requirements will include IFC Exclusion List and national E&S laws and regulations which will apply to the asset class to be supported by IFC.

The main E&S risks and impacts of the project are related to occupational health and safety, labor and working conditions, life and fire safety, and pollution aspects at the client’s SME borrowers' premises.

Summary of Client Environmental and Social Management System (ESMS)

This is an existing client with an existing E & S risk management system (ESMS) and E & S officer responsible for implementation. The current ESMS will be required to be applied for the proposed IFC project as well. FICCL will also be required to ensure ongoing compliance with requirements on labor and working conditions under Performance Standard 2

Contacts

For Inquiries About the Project, Contact

Fullerton India Credit Company Ltd
Mr. Arvind Sampath
Head - Treasury
+91 22-43215205
arvind.sampath@fullertonindia.com
Ground Floor, Tradepoint Building, Kamala Mills, Lower Parel, Mumbai – 400013
Websitehttps://www.fullertonindia.com/

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