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MICROCAPITAL BRIEF: CDC, Creation Investments, DEG, International Finance Corporation (IFC), FMO Acquire 40% Equity stakes in India’s Equitas for $51.4m

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The Commonwealth Development Corporation (CDC), which is owned by the UK government; Creation Investments Capital Management (Creation Investments), a US-based alternative investment management company; Deutsche Investitions-und Entwicklungsgesellschaft GmbH (DEG), a German development finance institution offering long-term project and company financing; the International Finance Corporation (IFC), the private-investment arm of the World Bank Group; and Nederlandse Financierings-Maatschappij voor Ontwikkelingslanden (FMO), a Dutch development bank, recently announced that they will invest a total of INR 325 cores (USD 51.4 million) to acquire 40 percent of the shares of Equitas Holdings, an Indian microfinance lender.

IFC, CDC and FMO are existing shareholders and will increase their ownership stakes to 13 percent, 9 percent and 5 percent respectively. DEG and Creation are new shareholders and will both own 11 percent of shares of Equitas Holding. Edelweiss Financial Services of India managed the deal for Equitas Holdings.

Equitas Holdings operates four companies: Equitas Microfinance, that provides microcredits between INR 10,000 (USD 157) and INR 20,000 (USD 315); Equitas Housing Finance; Equitas Vehicle Finance and Equitas Finance, which offers loans between INR 50,000 (USD 786) and INR 5 lakh (USD 7,865) to small and medium-sized enterprises (SMEs).

As of March 2014, Equitas had total assets of INR 25.9 billion (USD 442.9 million) and had achieved INR 741.5 million (USD 12.7 million) profit after tax in the previous quarter.

In 2013, CDC invested GBP 416 million (USD 655 million) in businesses in developing countries, and made a total profit (after tax) of GBP 117 million (USD 184 million). As of 2013, CDC’s portfolio of investments stands at GBP 2.5 billion (USD 3.93 billion) and includes 1,301 investee businesses. As of December 31, 2012, DEG reported total assets of EUR 4.6 billion (USD 6.4 billion).

IFC has 184 member countries and reported total assets of USD 77.5 billion as of fiscal year-end 2013. In 2013, FMO reported total assets of EUR 6.2 billion (USD 8 billion) as well as placing new investments valued at EUR 1.5 billion (USD 2 billion) during the year.

By Simon Pfanner, Research Associate

About Equitas Holdings Private Limited

Equitas Micro Finance is a non-deposit-taking microfinance institution (MFI) that was created in December 2007 and is based in Chennai, India. The objective of the company is to make credit available at a reasonable cost and in a transparent manner to the underbanked population of India. Equitas is active in seven states and union territories in India: Gujarat, Karnataka, Madhya Pradesh, Maharashtra, Puducherry, Rajasthan and Tamil Nadu. Equitas aims to achieve sufficient returns on investment in order to attract private capital. Equitas Micro Finance is a unit of Equitas Holdings, which also controls Equitas Vehicle Finance, Equitas Finance and Equitas Housing Finance. As of March 2014, Equitas had total assets of INR 25.9 billion (USD 442.9 million) and had achieved INR 741.5 million (USD 12.7 million) profit after tax in the previous quarter.

About Commonwealth Development Corporation (CDC)

The Commonwealth Development Corporation (CDC) was founded in 1948 as a development finance institution owned by the United Kingdom government’s Department for International Development (DFID). CDC provides investments in businesses in developing countries, including investments in equity and debt guarantees through funds and intermediairies. In 2013, CDC invested GBP 416 million (USD 655 million) and made a total profit (after tax) of GBP 117 million (USD 184 million). As of 2013, CDC’s portfolio of investments stands at GBP 2.5 billion (USD 3.93 billion) and includes 1,301 investee businesses.

About Creation Investments Capital Management Limited Liability Corporation (LLC)

Creation Investments Capital Management Limited Liability Corporation (LLC) is an alternative investment management company whose mission is to alleviate global poverty by making direct, for-profit investments in organizations that engage in economic development. The company is headquartered in Chicago in the US state of Illinois. Creation Investments manages Social Ventures Fund I, which it established in 2010 with USD 31.8 million in committed capital, which was disbursed to five MFIs in Latin America and Central and Eastern Europe. Creation Investments’ Social Ventures Fund II, which achieved its first close in 2013, holds assets of USD 75 million.

About Deutsche Investitions-und Entwicklungsgesellschaft GmbH (DEG)

Deutsche Investitions-und Entwicklungsgesellschaft GmbH (DEG), a member of KfW Bankengruppe, is a German development finance institution offering long-term project and company financing. DEG provides assistance to all sectors, with particular attention to agribusiness, financial institutions and infrastructure and processing industries. As of December 31, 2012, DEG reported total assets of EUR 4.6 billion (USD 6.4 billion).

About International Finance Corporation (IFC)

The International Finance Corporation (IFC), a US-based multilateral development bank and member of the World Bank Group, offers loans, equity investments and advisory and risk mitigation services to private companies with the intent of alleviating poverty and promoting open and competitive markets in developing countries. IFC has 184 member countries and reported total assets of USD 77.5 billion as of fiscal year-end 2013.

About Nederlandse Financierings-Maatschappijvoor Ontwikkelingslanden N.V. (Netherlands Development Finance Company, FMO)

Nederlandse Financierings-Maatschappij voor Ontwikkelingslanden (FMO) is a Dutch development bank that was founded in 1970. It supports financial institutions and governments through loans, guarantees and other investment promotion activities including local-currency investments. FMO is owned by the Dutch government, which holds a 51-percent stake, alongside commercial banks, trade unions, employers’ associations and individual investors. In 2013, FMO reported total assets of EUR 6.2 billion (USD 8 billion) as well as placing new investments valued at EUR 1.5 billion (USD 2 billion) during the year.

Sources and Additional Resources:

[1] The Economic Times, Equitas Holdings to offload about 40% stake for Rs 325 crore

MicroCapital, May 28, 2014, Lok Capital, Creation Investments Invest Total of $13m in Indian Microfinance Institution Equitas Holdings

MicroCapital, January 17, 2014, UK’s CDC Group Makes $16m Equity Investment as Part of $36m Package for Equitas

MicroCapital, September 18, 2013, Standard Chartered Bank (SCB) Loans $11m to India’s Equitas Microfinance, Satin Credit Care

MicroCapital Universe Profile: Creation Investments Capital Management Limited Liability Corporation (LLC)

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