The Venture Intelligence Blog

The Lessons E-Commerce Entrepreneurs & Investors Should Learn from their Microfinance Peers In an article for  Economic Times , Private Equity investor Vivek Singla points why blaming the measurement parameter Gross Merchandise Value (GMV) for the ills of the E-Commerce is not productive. He recommends E-Comm Entrepreneurs and Investors take a leaf out of how the Microfinance industry emerged from its regulatory crisis - by resetting their valuation expectations. For the investors, one of the reasons behind the sharp reversal in sentiment is the build-up in bitterness against the GMV, with many now labelling it as a pure vanity metric...instead of being dismissive about the GMV and e-tailing at large, investors should augment the gross dollar spend with deep dive into the business performance. After all, GMV is an important component of the due diligence checklist, but not the only one.  ...most international GMV based trailing multiples fall below 1×. On the ot...

A Scroll article titled  A tsunami of debt is building up in Tamil Nadu – and no one knows where it is headed   writes about rising level of debts in Tamil Nadu with signs of stress heading to a mass default.  In 2001, the average annual income of these families was Rs 16,000 and average debt at Rs 10,000. Come 2016, annual income has risen five-fold to Rs 80,000. Average debt, however, stands at Rs 2,50,000. This is a 25-fold increase. Venture Intelligence  is India's longest serving provider of data and analysis on Private Company Financials, Transactions (private equity, venture capital and M&A) & their Valuations in India.

In an Economic Times article , journalists Shailesh Menon & Indulal PM use Venture Intelligence Exit data for returns in PE/VC investments in Microfinance companies: Microfinance has drawn private equity funds with the sector generating an average return of 5.8 times to invested capital during 2010 to 2015, according to data from Venture Intelligence .  The following reasons have been stated by the article for the resurgence of interest in Microfinance sector: Recent successful exits in Equitas Holdings & Ujjivan MFI Growing loan book (The industry loan book has increased by 130% to Rs 47,200 crore in 2014-15) Rationalising of lending rates and higher profitability in the post-Andhra crisis. RBI decision to award small finance banks (SFB) licences to some of the MFIs Venture Intelligence is India's longest serving provider of data and analysis on Private Company Financials, Transactions (private equity, venture capital and M&A) & their Valuations in In...

Chennai-based Equitas Holdings , which is focused on providing microfinance and other financial services to bottom-of-the pyramid customers, closed its first day as a public company at INR 135.25, a gain of 23% over its IPO price of INR 110 per share. The company was 93% owned by PE/VC and Impact Investors prior to its IPO. You can receive such updates via the Venture Intelligence Deal Digest Weekly Newsletter which delivers all the funding action of the week to your inbox. FREE!   Subscribe. Venture Intelligence is India's longest serving provider of data and analysis on Private Company Financials, Transactions (private equity, venture capital and M&A) & their Valuations in India.

Economic Times has a feature on SKS Microfinance and the company's founder Vikram Akula pegged on the recent move by SKS Trust which holds a 12.6% in the publicly listed company to nominate Akula to its board. Venture Intelligence is the leading provider of data and analysis on Private Company Financials, Transactions (private equity, venture capital and M&A) & their Valuations in India. Click Here to view our products list including the Free Deal Digest Weekly: India's First & Most Exhaustive Transactions Newsletter.

Business Today has a profile of the latest Indian adaptation of the Kiva.org model that enables individuals lend to the poor. Micrograam , set up in February 2010 by Rangan Varadan, a former head of banking and capital market verticals at Infosys, has devised an innovative means of extending credit to the poor by creating a portal that brings investors and borrowers together, allowing them to work out their own deals. Micrograam's initiative has been a hit: in just 16 months it has found 270 investors and helped disburse loans of around Rs 87 lakh to 563 borrowers. The timing has helped too, since the microcredit sector is currently in crisis, and loans for the poor have dried up. ...Restricting its activities to Tamil Nadu and Karnataka, the Bangalore-based Micrograam has so far roped in 33 NGOs which identify borrowers. It puts up a list of prospective borrowers on its portal, along with each one's profile, the amount he needs and the maximum interest he can afford. ......

SKS Microfinance founder Vikram Akula and Grameen Bank founder Muhammad Yunus present two very different viewpoints on how to scale microfinance at a fascinating recent panel at the Clinton Global Initiative conference. The main difference between the two has less to do with whether microfinance should be for profit or not, but who the profits should accrue to. While Akula makes a convincing case why there is no conflict in maximising returns for shareholders and offering the best possible deal to borrowers, Yunus believes that, in the long run, the financial returns focused investors in SKS would force the company to move away from doing what's best for the poor. You can view the full video of the session here For more on this debate, check out the post on David Roodman's Microfinance Open Book Blog here Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of data and analysis on private equity, venture capital and M&A deals in India. View ...

The proposal to cap interest rates charged by MFIs (at 24%) - via a finance ministry letter to PSU banks - has caused significant irritation to the industry and its investors. From an article in the Mint: The smaller MFIs could go bankrupt, according to Sumir Chadha, managing director of Sequoia Capital India Advisors Pvt. Ltd—a private equity fund that supports microfinance lenders. “This reminds me of the price-control era, which ended more than 20 years ago,” he said. ...At least one in three MFIs in India are loss-making, and most of them are start-ups with a portfolio of under Rs.5 crore, shows a recent study by ACCESS Development Services, a not-for-profit organization that provides consulting services to MFIs. ...“The cost of operation in remote areas is high for all, and unless some concessions are given to smaller MFIs and those that operate in remote areas, the idea of financial inclusion through MFIs would be defeated,” said Mahajan Vineet Rai of social VC firm Aavishkaar s...

Vineet Rai of social VC firm Aavishkaar makes several interesting points as part of a Business Today roundtable on the sector. One tipping point was in 2004-05 when the partnership model by ICICI Bank showed that scale can be achieved in microfinance. (ICICI Bank would forge an alliance with an MFI, which would identify, train and promote the clients and ICICI Bank would finance the clients directly.) This made the sector interesting — at least for the debt providers at that time. The second tipping point was Vikram Akula (of SKS Microfinance) standing up and saying I can raise capital and actually scale up.... Basically what he showed was that you can scale up rapidly and become fairly large. ...There are a few things you need to look at today. You need capital, which brings with it the issue of valuation and ownership and greed. We started with client acquisition as a model. Now the investor question is client stickiness, and differentiation has become the buzzword. Nobody wants to ...

...is Microfinance, points out Vijay Mahajan, founder of Basix tracing the evolution of the sector in an article for Business Today. With the exception of the mobile telecom, perhaps no other sector has grown as fast and as big in terms of customer base as the microfinance sector in India in the past two decades. Today, the MF sector lends Rs 1,000 crore (11 digits) every month! ...In the long run, MFIs will probably resolve into two segments— the developmental MFIs and commercial MFIs. Developmental MFIs will be more focussed on the poor and on social impact, and offer more broad-based financial services such as microinsurance and remittances. Many of them will go beyond financial services and take a livelihood approach. They will have to increase their reliance on funding sources sympathetic to these approaches— such as philanthropic foundations, social investors and governments. On the other hand, the commercial MFIs will focus on microcredit to those slightly above the poverty lin...

Nachiket Mor of ICICI Foundation has triggered an interesting discussion via a blog post (on Ajay Shah's blog) on the importance of securitization for microfinance companies. Over the years, the demand for funds in the microfinance industry has outpaced the growth in investment by banks. In addition, banks are not the ideal place for these assets, given the nature of cashflows and maturity of micro loans. Hence, even though MFI assets are part of priority sector lending, the excessive focus on bank capital has effectively raised the cost of capital for MFIs. The upstream funding for microfinance needs to be diversified to harness a diverse array of borrowers, so as to avoid the constraints and unique compulsions of any one source. However, at present in India, MFIs are not permitted to mobilise deposits, or borrow from international lenders, or from MIVs (Microfinance Investment Vehicles). The ideal financing channel for them, in this environment, is securitization. Through securi...