The broad objective of IFMR FImpact Medium Term Opportunities Fund (“Fund”) is to promote financial inclusion in India by enabling direct and indirect financing of microfinance institutions, small enterprises, affordable housing, commercial vehicles, agriculture and corporate finance and its underlying assets and to earn higher risk-adjusted returns by leveraging on the underwriting expertise of the IFMR Group. The fund has a lock in of 5 years. The fund expects to return the principal to Senior Investors by end of 5 years, and targets a pre-tax IRR of ~ 11.5%-12% (gross of tax, net of all expenses and charges)
The Fund will invest in a diversified pool of securities in issuers working in the microfinance sectors, affordable housing, small business loans, commercial vehicle finance, agri-business finance and corporate finance sector and earn higher risk-adjusted returns. The Fund will seek to participate in sub-sectors within financial services that cater to informal sector / financially excluded households and enterprises. The Fund Manager will seek to benefit from the vast expertise, underwriting, risk management and credit history of IFMR Capital.
The investment strategy of the Fund is provided as follows:
- Investing in a mix of securities – Providing growth capital for Portfolio Entities in the form of investments in senior secured bonds, unsecured bonds, subordinated debt, redeemable preference shares, commercial papers, pass through certificates (PTCs), market-linked debentures, debt funds and other permissible securities accordance with the Regulations and other Applicable Laws.
- Alternate source of domestic funding – The Fund seeks to enable diversification by way of both funding sources and type of funding for its Portfolio Entities.
- Access to bond market – The Fund will help in the development of bond markets in India.
The broad contours of the Fund are as follows,
|Issuer||A Category II Alternative Investment Fund (AIF) registered with SEBI|
|Proposed size||Rs 250 crores, with a greenshoe option of INR 250 crores|
|Target returns||IRR (net of all expenses) for Senior Investors ~ 11.5%-12%|
|Management fee||A fee of 1.5% will be charged to the client as fund management and risk monitoring services|
|Tenor and Maturity||5-year, close-ended (including redemption timeline)|
|Payouts||Periodic payments: Quarterly surplus payouts
Principal: Bullet repayment
|Listing||Units issued by the AIF will be listed if permitted by regulations (presently, the framework for listing of AIF units is not in place).|
|Nature of investments||Investments will be made in rated senior secured bonds, unsecured bonds, subordinated debt, redeemable preference shares, commercial papers, PTCs, liquid debt funds and other instruments permitted by extant regulations|