From our vantage point, we have the ability to straddle opportunities in credit, investment banking and fund management. We understand the needs of our investors as well as the needs of our clients. Through a combination of our capital, products and partnerships, we connect millions of borrowers to mainstream debt investors. Our rigorous credit underwriting approach and our in-depth understanding of capital markets allows us to offer efficient debt solutions for client partners and attractive risk-return opportunities for debt investors.
According to the report titled ‘Financing India’s MSMEs’ by IFC issued in November 2018, the viable debt gap in the median enterprises sector is in excess of Rs. 25 trillion which can be addressed by financial institutions in the near term.
Further, on account of robust and sustained equity support over the last decade from institutional investors, a large number of medium enterprises with sustainable business models and strong governance structures have emerged.
We started financing of mid-market companies in 2016 and we are often among the early lenders to them. We finance borrowers in this segment exclusively for their growth needs such as working capital purposes, capital expenditure, etc. Over the last five fiscals, we have worked with companies across preferred sectors, such as food & agriculture, education, healthcare, clean energy, B2B services, logistics and IT/ITeS. The sector insights and know-how built through our work across specified sectors enables us to address the credit opportunities in the sector with more efficiency, and also help our Investor Partners access them through our platform.
We aim to identify suitable borrowers in this segment early by being an initial source of debt capital to them and/or supporting the growth of their business over their life cycle. Our underwriting framework for this borrower segment has among other things focussed on the identification of early stage or transformational companies that are: (i) backed by strong promoters; (ii) have implemented sound corporate governance structures; (iii) have in place strong processes and controls for a sustainable business model, and (iv) robust cashflows.
We identify potential borrowers through a combination of online sources, references, scoping activity within each asset class, sector-specific events and seminars, as well as through references by private equity investors and debt arrangers. Similar to the on-boarding of Originator Partners, we carry out pre-DD and DD processes for this borrower segment as well. Since Fiscal 2016, we have conducted pre-DD on 187 mid-market companies, of which DD was undertaken on 102, and 67 were approved and on-boarded as borrowers.
The growth in our clients’ business provides us with opportunities for repeat business with them and to finance their ecosystem players comprising of vendors, customers, etc. As our clients build their credit history with us and scale up in size, we also work with our Investor Partners to syndicate and structure financing from Investor Partners for them, in addition to financing from our balance sheet.