2014-05-16

Risk capital firms now backing small business lenders

Finance companies that provide loans to small businesses are grabbing the attention of risk capital investors.

Risk capital firms now backing small business lenders

Finance companies that provide loans to small businesses are grabbing the attention of risk capital investors. Private equity fund WestBridge Capital, which primarily buys stake in listed companies, said it will acquire a minority stake in the Bangalore based non-banking finance company Vistaar Finance for Rs 100 crore. 

 

In backing small business lenders, risk capital firms are hoping to recreate the success they have seen by investing in gold loan financing companies. "It's a large untapped market which is getting organised. Just as it happened in gold financing, it will happen in SMEs," said Rishi Navani, Managing Director, Matrix Partners. 

 

The Chennai-based lender provides secured loans to over 5,000 businesses and is present across 30 branches in Tamil Nadu. Matrix Partners has also invested in gold loan provider Muthoot Finance. 

 

Most risk capital firms are buying stakes in a new set of finance companies that lend to small enterprises in sectors ranging from power looms to groceries. This includes finance companies like NeoGrowth Credit, Vistaar Finance, Kinara Capital as well as slightly more mature companies like Five Star Business Credits and Intec Capital. These companies are expected to gain from demand for debt amongst small business across India. 

 

According to a November 2012 report by the International Finance Corporation overall finance demand of medium, small and micro enterprises totals Rs 32.5 trillion. Just about a fourth of this demand is met by formal banking sector with loan sizes mostly ranging from Rs 5 crore to Rs 20 crore. 

 

However, small businesses are hungry for bite-sized funding in the range of Rs 1 lakh to Rs 20 lakh. It is this category that finance companies are targeting by offering loans at interest rates of about 20 per cent.

 

"It is critical to understand the MSME businesses, which will be a value driver for these NBFCs," said Niren Shah, Managing Director, Norwest Venture.

Related opportunities
  • Online Food Ordering Services
    We started extending our territories in 2016 and ever since,..
    Locations looking for expansion West bengal
    Establishment year 2016
    Franchising Launch Date 2023
    Investment size Rs. 5lakh - 10lakh
    Space required 100
    Franchise Outlets -NA-
    Franchise Type Unit
    Headquater Kolkata West bengal
  • Health Total is the only market player which successfully delivers..
    Locations looking for expansion Delhi
    Establishment year 1997
    Franchising Launch Date 2023
    Investment size Rs. 10lakh - 20lakh
    Space required 500
    Franchise Outlets -NA-
    Franchise Type Unit
    Headquater New delhi Delhi
  • Overcoming the quality concerns and hygiene challenges that street food..
    Locations looking for expansion Haryana
    Establishment year 2019
    Franchising Launch Date 2023
    Investment size Rs. 50lakh - 1 Cr.
    Space required 250
    Franchise Outlets -NA-
    Franchise Type Unit
    Headquater Faridabad Haryana
  • Since its inception in 2016, SVAKS ethnic wear has been..
    Locations looking for expansion Andhra pradesh
    Establishment year 2016
    Franchising Launch Date 2023
    Investment size Rs. 30lakh - 50lakh
    Space required 800
    Franchise Outlets -NA-
    Franchise Type Unit
    Headquater Hyderabad Andhra pradesh
Insta-Subscribe to
The Franchising World
Magazine
tfw-80x109
For hassle free instant subscription, just give your number and email id and our customer care agent will get in touch with you
email
mobile
OR Click here to Subscribe Online
Daily Updates
Submit your email address to receive the latest updates on news & host of opportunities

Free Advice - Ask Our Experts

pincode
;
ads ads ads ads