Buoyed by success of its domestic AIFs, it plans to tap foreign investors through its maiden offshore fund targeted at microfinance sector
IFMR Capital, which specialises in investing in institutions providing informal credit, is planning its maiden offshore alternative investment fund (AIF), giving foreign investors an opportunity to invest in this high-growth sector.
The non-banking financial company, backed by Tata Capital and LeapFrog Investments, has so far invested in 36 microfinance outfits and manages two domestic funds that are fully deployed. Besides, IFMR has received approval from Securities and Exchange Board of India (Sebi) for its third domestic fund targeted at the microfinance sector.
"Following the success in the domestic fund management space, IMFR Investment Managers will be launching offshore funds for international investors," IFMR Capital has told in its report to its debentureholders. These funds would be targeted at microfinance sector, which is a major chunk of IMFR's existing portfolio.
IFMR's offshore strategy will consist of two segments.
"For investors willing to invest directly in India-based AIFs, the current regulatory structure permits our domestic based AIFs to take foreign investments; however, for investors who would like to invest in offshore jurisdictions, IIMPL (IMFR Investment Managers Pvt Ltd) will set up international funds in favourable jurisdictions," CEO Kshama Fernandes said in the director's report without indicating the likely corpus of the fund.
The structured finance player has been bringing in a new set of investors into emerging asset classes, specifically catering to the informal retail segments by expanding the access of mutual funds to microfinance and taking foreign banks onboard.
"Importantly, we added foreign banks as a new investor category. These relationships will be key to expanding into newer geographies and raise risk appetite for offshore markets," she said.
Markets watchdog Sebi now regulates AIFs which pool in capital from Indian and foreign investors for investing as per a pre-decided policy. Such funds have also drawn a lot of interest from High networth individuals who are reportedly favouring AIFs because of the flexibility offered, including investment opportunities in unlisted securities and resorting to leverage.
IFMR has been offering handsome returns to its investors with a return on equity of 24%, managing two AIF funds with commitments from six insurance and one bank investor, totalling Rs 265 crore.
The firm has been diversifying its portfolio and now works in sectors like affordable housing, small business loans, commercial vehicles and agri-business apart from microfinance, executing more than Rs 8,000 crore of placements through securitisation, bonds, commercial paper and collateral bond deals.
And with several entities set to emerge as small banks in coming days, there would be bigger opportunities for structured financiers like IFMR.
"Lot of regulatory changes have resulted in creating a potential for newer opportunities for us including the emergence of the small finance banks, positive changes to securitisation taxation, permission for FDI (foreign direct investment) into AIFs, the work on bankruptcy code and an overall positive regulatory and business outlook for the sectors we work in," the CEO said.
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