CDC Group plc, the UK’s development finance institution, has today demonstrated its continued support for economic growth and development in India by making a US$10m (INR 65 crores) investment in Veritas Finance, a Chennai-based financial services firm.
Founded in 2015, Veritas lends to over 12,000 micro, small and medium-sized enterprise (MSME) customers in rural and semi-urban areas, most of which are outside the formal banking sector. It provides long-term financing for business expansion as well as shorter-term loans for working capital. Veritas currently operates 60 branches and 97 micro centers in Tamil Nadu, Puducherry, Karnataka, West Bengal and Odisha.
MSMEs make up the backbone of the informal Indian economy and are often family or individual run. However, many find it difficult to access credit given their informal status and lack of documentation. Veritas helps these businesses to access capital at affordable rates, build a credit profile, and move into formal credit channels.
CDC’s US$10m (INR65 Crores) equity investment will support the company’s expansion into newer states like Andhra Pradesh and Telangana, help deepen its presence in existing locations and aid in the development of new technology that will lower costs for its customers. Veritas has grown rapidly in the last 2 years, from a standing start in late 2015 to more than 12,000 customers today. The Company aims to further grow its loan book to INR 1000 Crores (c.US$150m) by 2019 from a current level of nearly INR 235 Crores (US$36m). Welcoming CDC’s investment, Veritas founder and Managing Director, D Arulmany said:
“This round of funding will allow us to expand and to also strengthen our technology to achieve higher productivity and bring down the cost of servicing micro-businesses. As a specialised lender in the MSME segment, we are constantly looking at product innovation and building superior credit assessment methods. We are pleased to partner with a reputed institution and a leader in the impact investment space like CDC, whose mission is to support financial inclusion initiatives like ours and make finance affordable and accessible to the informal segment.”
CDC has invested around US$250m equity in the Indian financial services sector, in companies including Equitas and Ratnakar Bank. The companies backed by CDC have created approximately 1 million jobs and reached almost 30 million customers. The focus of these investments has been to promote financial inclusion of the under-served, particularly for MSMEs as a key engine of job creation. Nikhil Balaraman, CDC’s South Asia Director said:
“Our investment in Veritas underlines our commitment to back companies with a strong development impact philosophy and business models that support financial inclusion for India’s disadvantaged. Financial services for the MSME space in India is a huge area, but is also hugely under-served. The team from Veritas stands out for its dedication and experience and we’re committed to help them reach ever more challenging geographies, giving their customers the financial tools and advice to prosper. CDC will also support Veritas in its use of technology to reach even more customers.”
CDC is joined in this funding round of Veritas by Lok Capital, a long-time partner of CDC in the impact investing community.