Investors raise stakes in India's microfinance sector despite stress during lockdown

Kolkata: Delhi-based microfinance firm Satya MicroCapital and Noida-based Sindhuja Microcredit are in the process of raising Rs 170 crore between them by selling equity shares even as the sector is going through liquidity stress.

The decision to infuse capital during the lockdown is positive for the country's microfinance sector, reflecting investor confidence with a business model built around lending to the bottom of the pyramid.

Satya MicroCapital completed a Rs 105 crore-deal with Japan-based Gojo & Company on March 22. In the process, the overseas investor raised its stake to 37% from a quarter, managing director Vivek Tiwari told ET.

Sindhuja Microcredit managing director Abhisheka Kumar said that his company has received Rs 25 crore from Norway-based Nordic Microfinance Initiative (NMI) while another Rs 40 crore capital infusion is in the pipeline.

The firm has sought Reserve Bank of India's permission as the share sale involves dilution of more than 26%.

"We are looking to get Rs 20 crore each from NMI and Mumbai-Based Carpediem Capital," Kumar said.

"Both investments came in the last few days, showing resilience of the sector," MFIN chief executive Harsh Shrivastava was quoted as saying in a statement. "This clearly shows the confidence that equity investors have on the Indian microfinance sector, its capacity to bounce back."

Suryoday Small Finance Bank also raised Rs 62 crore from Gaja Capital, Kotak Life, Lok Capital and three other existing investors through a private placement of shares last month.

The lockdown to tackle Covid 19 outbreak has put micro lenders under stress with cash flow disruptions for the past two months. The sector, which has been categorised as an "essential service", is gradually opening up but is facing challenges in repayment collection with over 80% of the borrowers opting for a moratorium on repayment.