In the past, IFMR launched three credit funds, which collectively raised around Rs600 crore.

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Mumbai: IFMR Investment Managers Pvt. Ltd, a unit of IFMR Capital, has launched two credit funds, targeting a corpus of almost Rs850 crore, focused on investing in the financial inclusion space, a senior executive said.

IFMR Capital provides access to capital for institutions that lend to financially excluded households and businesses. IFMR Capital has raised over Rs40,000 crore for its clients till date.

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The two funds—IFMR FImpact Long Term Credit Fund and IFMR FImpact Medium Term Opportunities Fund—will have a base size of Rs200 and Rs250 crore, respectively, with green shoe options of Rs150 crore and Rs250 crore each, said Vineet Sukumar, chief executive officer of IFMR Investments.

The long-term credit fund has a tenure of 10 years, while the other fund has a tenure of five years, he said.

“The design of the funds has been carefully thought out taking into account the current investment climate and investor requirements. The 10-year fund was a market need towards providing an investment avenue for stable long-term debt exposure while the five-year fund is set up to provide attractive post tax returns with reduced risk,” said Sukumar.

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The two funds, set up as category II alternative investment funds (AIFs), will be deployed in sectors such as microfinance, small business loan finance, affordable housing finance, commercial vehicle finance and agri-business finance, as well as in mid-sized corporations

The fund manager already has sufficient visibility in terms of the fund-raising efforts for both the new offerings and expects to close the fund-raising by June.

The new funds are focusing their capital raising efforts towards institutional investors, a strategy used over the previous three funds too, said Sukumar.

“What we have tried to attempt so far is to set up stable and long-term institutional investor base. For the overall corpus that we have set up so far, 90% of the investor base is institutional, while the broader AIF market is generally more retail focused. The reason is that we live in a universe where the underlying inclusive finance market is not very well understood by the mainstream investor community and is more suited for long-term, institutional capital,” he said.

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The funds are targeting institutional investors such as life insurers, general insurers, banks and non-banking financial companies.

According to Sukumar, the new credit funds will be targeting a relatively untapped market in the debt investment universe.

“Typically, you either have a mutual fund running a credit fund offering say anywhere between 8.5-9% return in today’s market conditions or you have a full fledged alternative fund, which does real estate and promoter finance, targeting 15% and above. We are trying to find the missing middle, which is moderate safety and moderate returns. This is a largely unexplored space,” he said.

The two new funds form part of IFMR’s strategy to increase the assets under management to at least $1 billion in the next four to five years. The plan will see the firm tapping overseas investors for this endeavour.

“There is a deep investor base sitting offshore and the equity markets are a testament to that. We have to make that real in the debt and the mezzanine space. We think that is a huge strategic imperative and we believe it is a big opportunity,” Sucharita Mukherjee, managing director and chief executive officer at IFMR Holdings, said in an interview with Mint on 31 January.

“We want to take the assets under management on the funds side to at least $1 billion in four-to-five years and offshore credit markets will be a part of that,” she added.
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