Profectus Capital Raises $25 Mn From International Finance Corporation

Profectus Capital, a non-banking finance company focused on micro, small, and medium enterprises (MSMEs), raised USD 25 million (approximately Rs 205 crore) through the issuance of non-convertible debentures (NCDs) to the International Finance Corporation (IFC), a member of the World Bank Group.

This is IFC’s first investment to finance energy-efficient (EE) machinery for MSMEs in India, a niche asset class in the financial services sector. Since the proceeds will be used to fund green assets, the NCDs have been labelled as green bonds, and Profectus Capital has developed a green bond framework in line with the International Capital Market Association’s green bond principles. IFC’s support will enable Profectus Capital to scale up EE equipment financing for MSMEs, which is key to India’s climate goals.

IFC's investment is complemented by advisory services under the European Union’s regional initiative Accelerating Climate Smart & Inclusive Infrastructure in South Asia (ACSIIS) program. As part of this, IFC will provide targeted advisory support to help the company identify EE assets in its current portfolio, build the capacity of its operations teams and management, and create a growth plan, contributing towards reduced greenhouse gas emissions.

K V Srinivasan, Founder, and full-time director of Profectus Capital said, “We are delighted to partner with IFC, a member of the World Bank Group. It is an honour for us and an affirmation of the robustness of our business model and performance that a prestigious institution like IFC has expressed faith and confidence in us. This partnership is of immense significance and value to us given that this is the first investment by IFC in India to finance the purchase of energy-efficient equipment by MSMEs. It will go a long way in aiding MSME capital investment in India. Since the commencement of our operations in 2018, we have progressed well in all dimensions including business growth, asset quality, and profitability despite many macro headwinds. With IFC’s investment in our green bonds, we look forward to further consolidating our position in the MSME market.”

Though an estimated 65 million MSMEs in India contribute about 30 per cent to the country’s GDP and about 40 per cent to exports, the credit gap for the sector is estimated to be INR 25.8 trillion (approximately USD 311 billion). Over 50 per cent of these MSMEs are manufacturing units incurring energy costs as high as between 35 and 40 per cent of their operating expenses. The projected energy consumption by MSMEs in the country is expected to more than double by 2030 to 72 metric tons of carbon dioxide (tCO2) equivalent to 30 metric tCO2 in 2017. This provides a significant opportunity for energy savings through the replacement of old machines with both new EE machines and retrofits.