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    US-based DFC backs IndusInd Bank's loan to Aviom India Housing Finance

    Synopsis

    India's micro-housing sector has got a boost with US-based Development Finance Corporation (DFC) taking exposure in Delhi-based startup Aviom India Housing Finance.

    Untitled-2Agencies
    KOLKATA: India's micro-housing sector has got a boost with US-based Development Finance Corporation (DFC) taking exposure in Delhi-based startup Aviom India Housing Finance.

    Aviom has received a $5 million guarantee from DFC on a 10-year loan from IndusInd Bank, helping it lower the cost of borrowing by 300-400 basis points, people familiar with the development told ET.

    While DFC is taking exposure on Aviom by providing a guarantee, there is no foreign currency risk involved for Aviom since it gets a rupee loan from IndusInd (Rs 35 crore).

    "The guarantee is effective when the Indian financial institution is familiar with the borrower and is prepared to make a loan, but needs a credit enhancement in order to increase the amount of the loan or lengthen the tenor of the loan," Loren Rodwin, managing director for the social enterprise finance team at DFC, said in response to ET's query. "The transaction is particularly significant since it will result in financing for women to purchase or improve their homes."

    Unitus Capital was the advisor to the deal.

    This comes close on the heels of DFC's $5.5 million guarantee to food supply chain WayCool Foods and $10 million debt financing to dairy foods startup Milk Mantra. The US-backed development finance institution has also lent $15 million to Varthana, a lender to promoters of affordable schools. These investments happened in the first quarter of FY21.

    "This DFC deal is expected to open up the access to other overseas funding," Aviom founder Kajal Ilmi told ET. "We are looking to borrow about Rs 500 crore this fiscal while Rs 200 crore, including ECBs worth Rs 150 crore, are already in the pipeline," said Ilmi, who is also the managing director.

    Aviom, which lends to women in households where the combined monthly income is Rs 15,000 to Rs 25,000, aims to take its outstanding loan book to Rs 750 crore by the end of FY21 from Rs 245 crore as of end-March. It lends anything between Rs 50,000 and Rs 5 lakh to a single borrower, with average loan size being at Rs 2.70 lakh.

    Last financial year, Aviom raised Rs 45 crore in equity from Japan-based impact investor Gojo & Company and another Rs 15 crore from Dutch fund manager Capital 4 Development (C4D) Partners.

    "DFC's guarantee backing IndusInd's long-tenure loan will serve as catalytic capital to Aviom and the affordable housing finance sector in general, given the typical asset liability mismatch that occurs in this industry," said Richa Natarajan, director at Unitus Capital said.

    The US financier said it is keen to support other Indian social enterprises that are in need of capital to scale their operations. In June, DFC announced its plan to invest $350 million in India to support multiple projects in the country’s financial services sector, health infrastructure, renewable energy and food security space.


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