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Exclusive: Madura Micro Finance gets fresh investment, Elevar clocks partial exit


Non-banking financial company Madura Micro Finance Ltd (MMFL) has raised equity capital from new investor in its Series B round of funding, where it’s existing financial investor has partially-exited, two person close to the development told VCCircle.

The Chennai-based microlender has a network of more than 200 branches across five states of India and plans to increase presence in Karnataka, Maharashtra and Kerala after the fund raise. It also plans to launch presence in Madhya Pradesh as part of its diversification plans and currently has majority of its branches in the home state.

When contacted, M Narayanan, CEO of MMFL, acknowledged the transaction and said AV Thomas of Kerala-based AVT Group picked 25% stake for Rs 60 crore of which Rs 40 crore was to subscribe to fresh shares.

He said existing investor Elevar Equity made a partial exit and MMFL chairman and managing director Tara Thiagarajan also sold some shares, without sharing further details.

One person privy to the development said Elevar Equity doubled its investment value in this deal.

An email query to the VC firm did not immediately elicit a response.

MMFL, which was established in 2006 and lends to women through self-help groups (SHGs), was valued at Rs 240 crore in this deal $35 million).

The company had a loan book of Rs 550 crore from 4 lakh borrowers as of 31 March 2016. In the current financial year, the company is expecting to close with a loan book of more than Rs 900 crore, Narayanan said.

Its lending model has its origins at the former Bank of Madura where beginning in 1995, the late KM Thiagarajan, as chairman and CEO, experimented SHG training and lending in the rural areas, as per its website.

Elevar Equity, which invested Rs 22 crore in 2008 held close to 22% stake in MMFL through its Unitus Equity Fund before the fund raise. Thiagarajan held 48% stake before the stake sale.

Meanwhile, Narayanan said the company is also in late stages of talks to raise Rs 50 crore in sub-debt to fuel its loan growth from group and individual lending as well as increase presence.

In May, The Economic Times reported that private equity firm Kedaara Capital is in talks to invest Rs 200 crore to buy 25-30% stake in the company. The company had termed that news as ‘incorrect’.

Deals in MFI space
In the last couple of years, while funding to the industry has grown significantly, small MFIs face a tough challenge in accessing funds from banks and equity capital from investors. Hence, microfinance companies have emerged as an attractive target for both full-servicebanks and other non-banking finance companies.

Last month, Au Financiers decided to sell its stake in Gujarat-based M Power Micro Finance Pvt. Ltd to comply with the regulatory requirement for becoming a small finance bank.

Au Financiers is also firming up plans to float its maiden public issue and is expected to file documents with capital markets regulator Securities and Exchange Board of India (SEBI) soon.

In September, Kotak Mahindra Bank Ltd (Kotak) acquired BSS Microfinance Pvt. Ltd (BSS) for Rs 139.2 crore ($21 million) in cash. The country's fourth-largest private lender said it will buy 99.49% of the Bangalore-based micro-lender from existing shareholders. BSS, which would become a subsidiary of the bank, had a net worth of approximately Rs 73 crore and a microfinance loan book of Rs 483 crore as of 30 June, 2016.

IDFC Bank picked a 9.99% stake in ASA International India Microfinance Pvt. Ltd for Rs 8.5 crore ($1.3 million) early this year.

In July, IDFC Bank acquired Tamil Nadu-based Grama Vidiyal Micro Finance Ltd as it was planning to become a mass retail bank with a significant footprint and customer base in five years. The micro-lender operates in 319 locations across 65 districts in six states.

Another private lender RBL Bank picked around 10% stake in Varanasi-based Utkarsh Micro Finance Pvt. Ltd which is in a transition phase to become a small finance bank. The investment by RBL Bank will make it a preferred partner and will help meet the future lending requirements of Utkarsh as a small finance bank.

In another deal, financial services firm Manappuram Finance Ltd acquired 70% stake in Asirvad Microfinance Pvt. Ltd in December 2014.

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Madura Micro Finance Ltd. is a non-banking finance company. It offers microfinance and credit services to small entrepreneurs and self help groups focusing on rural population. It offers entry level loan, activity term loan, certified activity loan, retail loan and abiviruthi loan. The firm also provides insurance services to its members. The company was incorporated in 2005 and is based in Chennai, Tamil Nadu with additional offices in Dharwad, Coimbatore, Tindivanam, Tenkasi, Sivagangai, Salem, Chidambaram, Karaikudi, Trichy and Madurai.

Head office:
Year Founded:
Tara Thiagarajan, Muthiah Narayanan
(Elevar Equity II)

Unitus Equity Fund II is a private equity fund managed by Elevar Equity Advisors Pvt. Ltd. It provides finance to growth-stage companies operating in in India, Mexico, the Philippines and Peru. The size of the fund is $70 million. It seeks to invest in education, healthcare, home improvement and financial service sectors. The firm seeks to invest between $1 million and $5 million in its portfolio companies.


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