Global Finance Corporation Considers USD 20 Mn Investment in FlexiLoans For MSME Lending

New Delhi, Dec 4 (KNN) The International Finance Corporation (IFC), a member of the World Bank Group, is contemplating an equity investment of up to USD 20 million in Epimoney Private Limited, the parent company of digital lending non-banking financial company FlexiLoans. 

The proposed investment aims to enhance access to finance for micro, small, and medium enterprises (MSMEs) and improve competitiveness in the Indian MSME lending market.

FlexiLoans, launched in 2016, has established a significant presence in the MSME lending sector, with over Rs 2,000 crore in assets under management. 

The company offers term loans ranging from Rs 2 lakh to Rs 10 crore and has an impressive track record, having disbursed over Rs 3,000 crore in loans during fiscal year 2024 and targeting Rs 5,100 crore in loan disbursements for the current fiscal year.

In September, FlexiLoans secured a Series C funding round of Rs 290 crore from global and domestic investors including Accion, Nuveen, Fundamentum, and existing investor Maj Invest. 

This funding is intended to expand operations, enhance product offerings, and strengthen technological infrastructure.

The proposed IFC investment comes with stringent environmental and social guidelines. 

Post-investment, FlexiLoans will be prohibited from supporting coal-related projects or high-risk transactions involving potential adverse environmental, social, or community impacts. 

The IFC will also provide technical assistance to help the company strengthen its loan operations and risk management practices.

However, recent financial indicators suggest some challenges. The company's loan book grew by approximately 13 per cent in the first quarter of the current fiscal year, reaching Rs 1,817 crore as of June 30, 2024. Nevertheless, asset quality has shown some moderation. 

The 90+ days past due (dpd) and adjusted 90+ dpd rates increased to 3.4 per cent and 5.79 per cent respectively, compared to 2.7 per cent and 4.9 per cent in the previous quarter.

Credit costs have correspondingly risen to 4.1 per cent in the June quarter of fiscal year 2025, up from 3.6 per cent in the previous fiscal year. 

The company's earnings profile remained modest, with a profit after tax of Rs 0.3 crore and an annualised return on managed assets of 0.1 per cent during the quarter ended June 2024.

Early-stage delinquencies have also seen a slight increase, with 30+ dpd and 60+ dpd rates rising to 5.6 per cent and 4.5 per cent as of June 30, 2024, from 4.7 per cent and 3.6 per cent in the previous quarter. 

Despite these challenges, the company maintains a comfortable collection efficiency, averaging 100.47 per cent over the 12 months ended June 30, 2024, according to Crisil Ratings.

The potential IFC investment represents a significant vote of confidence in FlexiLoans' business model and its critical role in supporting India's MSME ecosystem, even as the company navigates potential economic challenges.

(KNN Bureau)