UK’s Greater Pacific to invest $10 m in Muthoot Microfin

UK-based private equity investor Greater Pacific Capital (GPC) is all set to infuse $10 million in Muthoot Microfin to raise its stake to about 16%, people familiar with the development said.

At present, GPC holds 14.37% in the NBFC-MFI, the microfinance arm of the Muthoot Pappachan group.

"We expect the deal to conclude by the end of September," Muthoot Microfin chief executive officer Sadaf Sayeed told ET.

The India-focused investor is raising its stake in the financial inclusion space at a time when the country is expected to emerge as the fastest-growing major economy. India has recently earned the distinction of being the fifth largest economy, overtaking the UK.

"The investment will make us comfortable capital-wise as we are witnessing rapid growth over the last few quarters," Sayeed said. Post-infusion, the capital adequacy of the company would rise to around 30%.

The micro lender is also looking to raise Rs 3,500 crore in debt to fund growth opportunities.

The lender with Rs 7,200 crore of assets under management at present is aiming to grow its books to Rs 8,500 crore by the end of March next year. The AUM was at Rs 6,254 crore at the end of March this year.

It also looks to expand its branch network by around 50% this year over the 900-odd branches it had as on March 31.

Investment in Muthoot Microfin is GPC's first in India's microfinance sector. It first came on board in December last year with a $50 million investment. It is the largest outside investor in the microlender while the promoter Muthoot Fincorp holds 54.5%.

"The firm’s strategy particularly supports investments in the theme of mass inclusion, which is key to India’s rise and development, and can also provide attractive investment returns," GPC said on its website.

India's microfinance market grew 24% year-on-year to Rs 2.76 lakh crore at the end of June from Rs 2.22 lakh crore, according to reports published by industry body Sa-Dhan.

It had said that funds flow to the sector has improved with robust growth opportunities back on the radar after a two-year Covid-19-related turmoil.