IFMR Capital: The Money Conductors

With its unique risk-mitigating financial products, the NBFC has handheld MFIs into the world of big finance. In the process, it has helped breadline businesses find their passports to growth - credit.

- Pravin Palande

Paramesan Gowda, 48, has been running a makeshift sandwich stall outside the BSE for many years. Given his humble business, he is not the typical customer to whom traditional bankers feel inclined to lend. With its overemphasis on paper work and address proofs, India’s banking and financial services system is not primed to give him credit. Hence, despite being in the heart of India’s financial nerve centre, Dalal Street, Gowda for long lingered beyond the fringes of the financial system, deprived of any formal channels of credit to grow his sales.

Until, that is, Mumbai-based Essel Finance Business Loans—a non - banking financial company (NBFC) that specialises in small business loans—sanctioned a Rs 30 lakh loan to Gowda in June 2014. Essel Finance Business Loans studied his business closely for two days and realised he had steady cash flows. Gowda repaid his loan in 13 months.

Essel Finance Business Loans may be the face of the help Gowda was getting, but there is another force that has enabled this support: IFMR Capital, a Chennai-based NBFC, which helps Essel Finance Business Loans meet its cash requirements.

IFMR’s relevance cannot be overstated. Even the NBFCs and micro finance institutions (MFIs) that lend directly to people like Gowda— they are called originators—find themselves stonewalled when trying to access capital from traditional banking channels. Enter IFMR Capital, which either lends directly to originators or connects them to cash-rich institutional investors like mutual funds and insurance companies. It has devised one-of- its-kind securitised debt products, or securitisation structures (see box on page 51), through which investors can put their money in originators.