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Summary of Proposed Investment
This Summary of Proposed Investment is prepared and distributed to the public in advance of the IFC Board of Directors’ consideration of the proposed transaction. Its purpose is to enhance the transparency of IFC’s activities, and this document should not be construed as presuming the outcome of the Board decision. Board dates are estimates only.
Reg Ind, Financial Markets, ASIA
Date SPI disclosed
November 23, 2009
Projected board date
December 24, 2009
Date revised SPI disclosed
November 24, 2009
Invested: March 31, 2010
Signed: March 24, 2010
Approved: March 18, 2010
AU Financiers (India) Private Limited (AU or the Company) is a regional NBFC, operating in the low income state of Rajasthan. It primarily originates loans which are classified under priority sector and agriculture lending as per Reserve Bank of India (RBI) guidelines. These loans are primarily targeted at segments that find it challenging to access bank financing. AU originates vehicle loans, business loans against property and small loans to customers mainly in semi-urban and rural areas. AU finances loans through a combination of channel financing, securitization, bank finance and through its own funds.
AU plans to increase its presence in Rajasthan by reaching further into semi-urban and rural segments and by geographically expanding to other states. The Company will fund its growth and expansion through a mix of equity capital, bank loans and securitization assignments.
Project sponsor and major shareholders of project company
Mr. Sanjay Agarwal (Sponsor) and India Business Excellence Fund (IBEF) and India Business Excellence Fund –I (IBEF-I) are the major shareholders in the Company. IBEF and IBEF-I are funds with a combined worth of US$125m, managed and advised by Motilal Oswal Private Equity Advisors Pvt. Ltd. (MOPE).
Sanjay Agarwal (Managing Director), a chartered accountant and majority shareholder, is a first generation entrepreneur and has more than 15 years experience in the finance industry.
Motilal Oswal Private Equity is a part of the Motilal Oswal Financial Services Limited (MOFSL), which provides a range of financial services such as Broking & Distribution, Institutional Equities, Commodity Broking, Portfolio Management Services, Wealth Management, Private Equity and Investment Banking Services. MOPE has invested in AU Financiers though the its managed and advised funds- IBEF and IBEF-I.
Total project cost and amount and nature of IFC's investment
AU plans to raise equity capital of up to INR 650m to fund its growth and expansion in its home markets as well as other states. IFC is considering an investment up to INR 350m along with other investors in the project to support the growth plan of the Company.
IFC investment as approved by Board
7.59 million (USD)
IFC Investment (million USD)
* These investment figures are indicative
Location of project and description of site
AU is headquartered in Jaipur and its major operations are in its home state of Rajasthan. The Company has 57 offices with 44 in Rajasthan, 9 in Maharashtra, and 4 in Gujarat and a total of 429 employees. AU mainly offers loans for heavy and light commercial vehicles, multi-utility vehicles and three wheelers.
AU is one of the few NBFCs operating in the low income state of Rajasthan with focus on individuals operating commercial vehicles for transportation.
Anticipated development impact of the project
Financial inclusion is one of the three pillars of the IFC’s regional strategy (the other two being Climate Change and Regional Integration). An increased focus on investments targeted at the low-income population that find it challenging to access bank financing would enhance financial inclusion.
This project, by addressing the financial services needs of underserved clients, forms an important tool for poverty reduction, private sector development and inclusive growth.
The project is expected to provide access to finance for the low income, the self employed, the farmers and first-venture entrepreneurs, in the semi-urban and rural areas of Rajasthan, Gujarat and Maharashtra.
IFC's expected development contribution
The equity capital raised by the Company will enable it to scale up its business and access a wider set of bank financing for its operations. The IFC support will thus improve the Company’s access to finance and reduce the Company’s reliance on a small number of banks for financing its growth.
AU is a small regional NBFC and has ambitious growth plans. IFC intends to work with AU for strengthening its risk management systems (e.g., credit risk, Asset-Liability management, etc.). In addition to providing advisory services in risk management, IFC will assist the Company in knowledge sharing and imbibing best practices relating to structuring new products and widening business areas to include broking insurance and other financial services to its target segments.
Environmental and social issues - Category FI
This project involves IFC’s support and has been classified as a Category FI project according to IFC’s Environmental and Social Review Procedure. AU will be required to:
· Develop a procedure relevant to its business process, prior to disbursement, that is satisfactory to IFC, and that ensures that all its investments are screened and processed to avoid supporting activities on the IFC exclusion list
· Identify qualified persons to manage and implement the procedure
· Demonstrate commitment and resources to implementing the procedure
· Demonstrate commitment to applying the labor standards established by the IFC Performance Standard 2: Labor and Working Conditions
· Submit a periodic report to IFC as per a format to be provided by IFC
For inquiries about the project, contact:
Mr. Sanjay Agarwal,
19-A Dhuleshwar Garden
Jaipur 302 001
Telephone : (+91)(0141) 391 0000
Fax : (+91)(0141) 236 8815
Email : email@example.com
For inquiries and comments about IFC, contact:
General IFC Inquiries
IFC Corporate Relations
2121 Pennsylvania Avenue, NW
Washington DC 20433
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