The Overseas Private Investment Corporation (OPIC), a development finance institution of the US government, has approved a loan guaranty of $185 million (Rs 1,316 crore) to Chennai-based Cholamandalam Investment and Finance Company Ltd.
The non-banking finance company will use the facility to provide vehicle and equipment purchase loans to about 25,000 small and medium-sized enterprises (SMEs) in low-income areas, OPIC said in a statement.
OPIC said that the total project cost is around $247 million and that US-based Citibank is the sponsor to the proposed deal.
The US institution provides financing to lenders worldwide either through loan guaranties or direct loans. A loan guaranty is an alternative financing method where a commercial bank, insurer or any other financial institution offers to provide the funds while OPIC determines the terms of borrowing and acts as the lender.
For Cholamandalam, which provides commercial vehicle finance and loan against properties, this is the second big financing round within four months.
In May, Cholamandalam raised $222 million in debt funds in an investment round anchored by World Bank arm International Finance Corporation (IFC). First Abu Dhabi Bank, MUFG Bank Ltd, National Bank of Ras Al-Khaimah PJSC, and CTBC Bank Co also participated in the funding round.
The US investor is among a bunch of development finance institutions (DFIs) with an India presence. The UK’s CDC Group Plc, Germany’s DEG and the Dutch lender FMO are other such institutions.
OPIC has committed about $2 billion in India. Most of this has been via direct investments in companies such as solar equipment maker Orb Energy Pte. Ltd.
OPIC has also emerged as a significant source of fundraising for private equity and venture firms investing in India. Its primary mandate is to help American businesses expand in emerging markets. It can fulfill this mandate by backing funds that invest in Asian and African companies.
OPIC’s India-related investments include committing $125 million to Greater Pacific Capital’s second fund. It has also made Limited Partner-style (LP) bets in healthcare-focused Quadria Capital as well as in Somerset Capital.
Overall, OPIC has committed over $4 billion across more than 60 private equity funds in emerging markets, according to its website.