Muthoot Microfinance Raises Equity Funding from Creation Investments

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Mumbai: Muthoot Pappachan Group, a diversified financial services conglomerate with presence in various other sectors spanning across hospitality, automotive, realty, IT services, healthcare, global services and alternate energy, has raised growth capital for its microfinance business from Chicago-based PE Fund Creation Investments,  thereby making it the first-ever Private Equity round of funding for any of its Group companies.

The Muthoot Microfin-Creation deal is the most significant one in the BFSI & microfinance space after the Indian Government’s demonetization-digital-cashless economy initiatives.

With this deal, Muthoot Microfin Ltd., one of the fastest growing microfinance companies in India, has raised Rs. 130 crore of growth capital from Creation Investment LLC (Creation), a well reputed Chicago-based PE firm. Post infusion, Creation will hold 11 per cent stake in Muthoot Microfin Ltd. The growth capital so raised will be utilised to serve BoP clients and to expand business to newer geographies such as Bihar, Uttar Pradesh, Odisha, Chhattisgarh, Haryana and Punjab in addition to the 10 existing states. Muthoot Microfin Ltd. proposes to open 500 new branches in the next three years to expand its footprint pan India. The capital will also be used to adopt the most advanced technology to enable reach to the last mile and to make cash less transactions for micro loans. The capital will also be mainly used for expansion and investment in technology and digitization.

Thomas Muthoot, Director, Muthoot Pappachan Group, said, “Muthoot Pappachan Group has built a fast-growing successful microfinance business with deep focus on the upliftment of BoP customers catering to rural areas and urban underprivileged sections of society. We have provided loans to over 4 lakh rural households in FY17 till December 2016. Our financial inclusion strategy is in sync with the Government’s agenda of technology-enabled cashless disbursement. The microfinance business has performed well over last 6 years, and we are delighted to have Creation as a partner for growing this business from here.”

Sadaf Sayeed, CEO, Muthoot Microfin Limited said, “Recent Private Equity Investment values Muthoot Microfin Ltd. at Rs. 1,111 crore. Despite the recent disruption, our business is growing at a growth rate of 280% and NPAs are still less than 0.60% which is proof that economy is more resilient than what it is made out to be. In the coming years, MML will venture into less financially penetrated states like Bihar, Chhattisgarh, West Bengal, Assam and expand operations in UP and Odisha, including other states where we currently operate.”

Ken Vander Weele, Co-Founder and Partner at Creation Investments said, “We are excited to partner with Muthoot Microfin for its next stage of growth. We are long-term investors who will provide them with all the necessary support to achieve their mission.”

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