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Commercial Credit and Finance PLC receives Rs. 1.68 billion: the Largest International PE Investment into a Sri Lankan LFC from Creation Investments

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FOR IMMEDIATE RELEASE

Commercial Credit and Finance PLC receives Rs. 1.68 billion: the Largest International PE Investment into a Sri Lankan LFC from Creation Investments

February 26, 2014 Chicago, IL USA – Leading emerging markets private equity investor, Creation Investments Capital Management LLC, through Creation Investments Social Ventures Fund II L.P. (collectively, “Creation”), has agreed to invest Rs. 1.68 billion (US$12.4 million equivalent) into one of Sri Lanka’s leading finance companies, Commercial Credit and Finance PLC (“CCF”). The transaction will involve the issuance of 80 million new shares for a consideration of Rs. 1.68 billion or approximately 25.15% of CCF. The transaction has received the necessary CBSL, SEC and CSE approvals and will be completed subject to shareholder approval.

 

This is the largest investment by an international private equity fund into a publicly listed Sri Lankan licensed finance company and is a strong validation for the success of CCF. Creation is impressed by the strength of CCF’s leadership and commitment to the mission toward serving the under-banked population in Sri Lanka. The new funds will be used by CCF for its future investment activities including further enhancing its branch network and expanding its asset and client base, and to meet the future capital adequacy requirements of the Company.

 

Creation has invested in many banks and finance companies across emerging markets and its investment into CCF will help provide guidance and support to CCF and promote best practises from its other international portfolio investments. The new equity investment will also strengthen the capitalisation of CCF and enable it to access international debt capital at attractive rates.

 

Roshan Egodage, CEO of CCF, commented on the transaction, “we are committed to providing a wide range of financial products to the Sri Lankan consumer including a variety of microfinance and SME products combined with a high quality service which is part of our core values. Our partnership with Creation will enable us to continue this journey and grow the company towards becoming Sri Lanka’s leading licensed finance company”.

 

Patrick Fisher, Managing Partner and Founder of Creation, added that “this is our first investment in Sri Lanka and the largest investment that we have made to date across our Creation Investments Social Venture Funds. We look for quality investment opportunities across many emerging and frontier markets globally. CCF exemplifies what we look for in prospective investments – market leadership, exceptional management, and alignment in the mission, vision and values. CCF is a leader in the Sri Lankan LFC sector given its tremendous growth in the past few years. We are excited to partner with the CCF team in supporting their future growth plans”.

 

Creation Investments Capital Management LLC

Creation Investments Capital Management LLC is a Chicago-based private equity firm founded in 2007 with over US$130 million under management. Its investor base includes Fortune 100 Banks, Insurance Companies, Hedge Funds, Family Offices and High Net Worth Individuals. Creation has invested in a number of financial services companies in emerging markets such as India, Mexico and Russia.

 

About Commercial Credit and Finance

Commercial Credit and Finance PLC is one of Sri Lanka’s leading finance companies with an asset base of Rs. 25.8 billion (US$198.5 million equivalent) and is listed on the CSE. CCF has a wide range of financial products including an innovative portfolio of SME and Micro products, including classic microfinance, working auto leasing, education loans, microsavings and Islamic banking, which are distributed to over 535,000 customers through 74 branches across the island. CCF has won countless awards including Gold Award for Service Brand of the Year (2012) and Excellence in Corporate Social Responsibility (2013), among many others. CCF maintains a rating of BB+ from RAM Ratings and has a reported ROE of 45.7%  as of December 31, 2013.

MICROCAPITAL BRIEF: Triodos Loans $9.6m to Microfinance Institution Grameen Koota of India, Portfolio Company of Creation Investments

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MICROCAPITAL BRIEF: Triodos Loans $9.6m to Microfinance Institutions Grameen Koota of India, Koperasi Mitra Dhuafa (Komida) of Indonesia

» Posted by  in Category: Deals,Investment Funds,South Asia, East Asia and Pacific at 1:30 am

Triodos Investment Management, a subsidiary of Dutch Triodos Bank, recently disbursed loans totaling the equivalent of USD 9.6 million to Grameen Financial Services Private Limited (Grameen Koota), a non-banking financial company (NBFC) in India, and Koperasi Mitra Dhuafa (Komida), an Indonesian microfinance institution (MFI) [1]. Grameen Koota will be receiving EUR 6 million (USD 8.2 million) through the issue of secured, redeemable, non-convertible debentures (NCDs) to two microfinance investment funds managed by Triodos: Triodos Fair Share Fund, which provides retail investors in the Netherlands the opportunity to invest in MFIs in developing countries; and Triodos Microfinance Fund, which gives institutional investors in Belgium, Denmark, Luxembourg, the Netherlands, and the UK opportunity to provide loans and equity to MFIs in Latin America, Africa, Asia and Eastern Europe [2].

Komida will be receiving EUR 1 million (USD 1.4 million) from Hivos-Triodos Fund, a collaboration between the Netherlands-based Hivos Foundation and Triodos Bank intended to promote entrepreneurship and microfinance in developing countries.

As of 2012, Grameen Koota reported to the US-based nonprofit Microfinance Information Exchange (MIX) total assets of USD 99.5 million, a gross loan portfolio of USD 96.5 million, 346,500 active borrowers, return on assets (ROA) of 2.19 percent and return on equity (ROE) of 12.6 percent. The institution does not accept deposits.

As of September 2013, Komida had an outstanding loan portfolio of EUR 7.7 million (USD 10.5 million), 127,800 borrowers and 59 branches. Komida lends exclusively to women [3].

By Nisha Koul, Research Associate

About Grameen Financial Services Private Limited (Grameen Koota): Grameen Financial Services Private Limited, popularly known as Grameen Koota, was founded in India in 1999 as a project of nongovernmental organization T Muniswamappa Trust and has since become an independent non-banking finance company (NBFC). It operates in the Indian states of Maharashtra, Karnataka and Tamil Nadu and offers products such as microloans, vocational training loans, workshops and access to educational centers. As of 2012, Grameen Koota reported to the US-based nonprofit Microfinance Information Exchange (MIX) total assets of USD 99.5 million, a gross loan portfolio of USD 96.5 million, 346,500 active borrowers, return on assets (ROA) of 2.19 percent and return on equity (ROE) of 12.6 percent. The institution does not accept deposits.

About Triodos Investment Management: Triodos Investment Management manages funds that invest in financial sector development in developing countries, renewable energy and venture capital. Among these are four microfinance investment funds: the Hivos-Triodos Fund, the Triodos-Doen Foundation, the Triodos Fair Share Fund and Triodos Microfinance Fund. Triodos also co-manages WWB Isis Fund, an equity fund launched by Women’s World Banking (WWB). As of October 31, 2013, these five funds had total assets of USD 696 million and collectively provide finance to 106 microfinance institutions and banks in 44 countries [4]. Triodos Investment Management is a subsidiary of Triodos Bank, a Dutch for-profit financial institution with assets of EUR 5.3 billion (USD 7.2 billion) as of 2012.

Commercial Credit and Finance PLC receives Rs. 1.68 billion from Creation Investments: the Largest International PE Investment into a Sri Lankan LFC

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Leading frontier markets private equity investor, Creation Investments Capital Management LLC (“Creation”), through its wholly owned subsidiary, Creation Investments Sri Lanka LLC (“Creation Sri Lanka”), has agreed to invest Rs. 1.68 billion (US$12.4 million equivalent) into one of Sri Lanka’s leading finance companies, Commercial Credit and Finance PLC (“CCF”). The transaction will involve the issuance of 80 million new shares for a consideration of Rs. 1.68 billion or approximately 25.15% of CCF. The transaction has received the necessary CBSL, SEC and CSE approvals and will be completed subject to shareholder approval.

 

This is the largest investment by an international private equity fund into a publicly listed Sri Lankan licensed finance company and is a strong validation for the success of CCF. Creation is impressed by the strength of CCF’s leadership and commitment to the mission toward serving the under-banked population in Sri Lanka. The offered price at a significant premium to the trading value and NAV indicates strong future growth potential for the company. The new funds will be used by CCF for its future investment activities including further enhancing its branch network and expanding its asset and client base, and to meet the future capital adequacy requirements of the Company.

 

Creation has invested in many banks and finance companies across emerging markets and its investment into CCF will help provide guidance and support to CCF and promote best practises from its other international portfolio investments. The new equity investment will also strengthen the capitalisation of CCF and enable it to access international debt capital at attractive rates.

 

York Street Partners (Pvt) Ltd. acted as Sole Financial Advisor to the transaction. Varners was the Legal Advisor to CCF and FJ&G De Saram was the Legal Advisor to Creation.

 

Roshan Egodage, CEO of CCF, commented on the transaction, “we are committed to providing a wide range of financial products to the Sri Lankan consumer including a variety of microfinance and SME products combined with a high quality service which is part of our core values. Our partnership with Creation will enable us to continue this journey and grow the company towards becoming Sri Lanka’s leading licensed finance company”.

 

Patrick Fisher, CEO of Creation, added that “this is our first investment in Sri Lanka and the largest investment that we have made to date across our Creation Investments Social Venture Funds. We look for quality investment opportunities across many emerging and frontier markets globally. CCF exemplifies what we look for in prospective investments – market leadership, exceptional management, and alignment in the mission, vision and values. CCF is a leader in the Sri Lankan LFC sector given its tremendous growth in the past few years. We are excited to partner with the CCF team in supporting their future growth plans”.

 

“This was a complex transaction that required careful negotiation through several structured options as well as regulatory approvals”, Sujendra Mather, MD at York Street Partners said reflecting on the transaction. He further added, “we are delighted to see the successful outcome of this transaction which is truly a win-win for both CCF and Creation and comes at an opportune moment when several key changes are taking place in the financial services landscape in Sri Lanka”.

 

About Creation Investments Capital Management LLC

Creation Investments Capital Management LLC is a Chicago-based private equity firm founded in 2007 with over US$130 million under management. Its investor base includes Fortune 100 Banks, Insurance Companies, Hedge Funds and High Net Worth Individuals. Creation has invested in a number of financial services companies in emerging markets such as India, Mexico and Russia.

 

About Commercial Credit and Finance

Commercial Credit and Finance PLC is one of Sri Lanka’s leading finance companies with an asset base of Rs. 24.5 billion as at December 31, 2013 and is listed on the CSE. CCF has a wide range of financial products including an innovative portfolio of SME and Micro SME products which are distributed to over 400,000 customers through 60 branches across the island. CCF has a rating of BB+ from RAM Ratings.