NEW DELHI, INDIA, APRIL 29, 2002—
The International Finance Corporation—the private sector lending arm of the World Bank Group—has signed an agreement to provide a loan of Indian Rupees 500 million (US$10.2 million equivalent) to a Chennai-based housing finance company, Sundaram Home Finance (SHF). This investment marks IFC’s first rupee loan in India.
SHF will use IFC’s loan to expand its portfolio of housing loans to individual borrowers. As a pioneer in housing finance, SHF takes loan products to smaller towns and cities in southern India and underwrites loans to self-employed borrowers. Majority-owned by Sundaram Finance, SHF has a paid-up capital of Indian Rupees 500 million with equity participation from IFC and FMO, Netherlands. In financial year 2002, the company approved loans amounting to about Indian Rupees 3 billion.
This project is part of a broader IFC strategy to build a portfolio of local currency products to provide clients in India with much-needed long-term financing without imposing currency risk. The loan to SHF follows other innovations by IFC in India, including partial credit guarantees of bond issues and securitization of student loans. For over 20 years, IFC has played an important role in helping address the housing needs of India’s growing population by systematically providing debt and equity financing to leading players in the market.
Ms. Mary Ellen Iskenderian, Director of IFC’s South Asia Department said, “IFC’s ability to offer loans in Indian Rupees to clients demonstrates our commitment to India. For companies which do not generate revenues in foreign exchange, this product will provide long-term local currency financing and protect clients against the risk of local currency depreciation. The provision of long-term Indian Rupee-denominated funds to SHF will also allow the company to expand its mortgage loan portfolio without undue maturity or interest rate risks."
Mr. Nitin Palany, Managing Director of SHF, added, “We are delighted to be the first company in India to benefit from this new IFC product and are eager to respond to the strong market demand for housing loans by quickly and productively employing IFC’s financing. This transaction will also enable us to leverage our ability to raise funds at competitive rates.”
IFC’s mission is to promote sustainable private sector investment in developing countries, helping to reduce poverty and improve people’s lives. IFC finances private sector investments in the developing world, mobilizes capital in the international financial markets, and provides technical assistance and advice to governments and businesses. Since its founding in 1956 through the close of the last fiscal year on June 30, 2001, IFC committed more than $31 billion of its own funds and arranged $20 billion in syndications for 2,636 companies in 140 developing countries. IFC’s committed portfolio at the end of FY01 was $14.3 billion.
