Global development institution International Finance Corporation, a member of the World Bank Group, is considering equity investment of up to $20 million in India’s Epimoney Private Limited, the parent company of MSME-focused digital lending non-banking financial company (NBFC) FlexiLoans. With over Rs 2,000 crore in assets under management, FlexiLoans offers term loans ranging from Rs 2 lakh to Rs 10 crore.
According to a disclosure document by IFC on its web portal for the proposed investment, the most significant expected project-level outcome from the investment is improved access to finance for MSMEs and greater competitiveness in the MSME lending market in India.
Post IFC investment, the disclosure said FlexiLoans will not support any coal-related projects or any higher-risk transactions that involve involuntary resettlement, potential adverse impacts on Indigenous peoples, significant risks to or impacts on the environment, community health and safety, biodiversity, cultural heritage; risk of significant retrenchment; or significant occupational health and safety risks.
“IFC, with the involvement of IFC banking specialist, will help the company (FLexiLoans) strengthen its loan operation and risk management practices as its business continues to scale.”
FlexiLoans in September this year had announced its latest fundraise of Rs 290 crore in Series C funding from global and domestic investors Accion, Nuveen, Fundamentum, and existing investor Maj Invest to expand its operations, enhance its product offerings, and strengthen its technological infrastructure.
Launched in 2016, the company disbursed over Rs 3,000 crore loans in FY24 and is looking to disburse Rs 5,100 crore loans in FY25 across in term loans and supply chain finance. It has disbursed over 1.3 lakh loans amounting to over Rs 7,000 crore so far.
While the loan book of the company has increased at around 13 per cent (annualised) in the first quarter of the current fiscal and stood at Rs 1,817 crore as of June 30, 2024, its asset quality has moderated.
The 90+ days past due (dpd) and adjusted 90+ dpd (including 12-month write-offs) for the company reached 3.4 per cent and 5.79 per cent respectively as of June 30, 2024, compared to 2.7 per cent and 4.9 per cent as of March 31, 2024, according to Crisil Ratings.
This has resulted in an increase in credit costs to 4.1 per cent in the June quarter of FY25 from 3.6 per cent in FY24. Thus, the company’s earnings profile remained modest with profit after tax of Rs 0.3 crore and annualised RoMA (return on managed assets) of 0.1 per cent during the quarter ended June 2024.
In terms of early-stage delinquencies for FlexiLoans, 30+ dpd and 60+ have increased to 5.6 per cent and 4.5 per cent respectively, as of June 30, 2024, from 4.7 per cent and 3.6 per cent as of March 31, 2024. However, the collection efficiency remained comfortable at an average of 100.47 per cent over the last 12 months ended June 30, 2024, as per Crisil Ratings.