• Funding will allow Electronica Finance Limited to scale up MSME credit, rooftop solar financing and micro loan-against-property (LAP) businesses
• Electronica Finance Limited’s assets under management have grown by 3x over five years

April 4 – Pune, India: Electronica Finance Limited (EFL), one of India’s largest providers of loans to MSMEs (Micro, Small and Medium Enterprises), today said that it has agreed upon $48 million of new funding. The equity round was led by LeapFrog Investments, the pioneering profit with purpose firm, with participation from Aavishkaar Capital, one of the leading impact investing funds in India.   Encourage Capital, a US-based responsible asset manager, is an existing investor in EFL but did not participate in this funding round.

Founded in 1990, EFL is at the forefront of MSME financing in India and is scaling its offerings under Shilpa Pophale, one of the most-experienced female CEO’s within India’s burgeoning financial services sector. The company has grown its assets under management (AUM) by more than 3x over the past five years. AUM now stands at over $480m and is projected to increase with a compound annual growth rate (CAGR) of around 35% over the next 3 years.

The funds secured will greatly strengthen the company’s balance sheet and provide the foundation for another phase of rapid expansion. The new capital will be used to boost MSME financing in the high growth potential manufacturing segment in India. EFL offers products like machine loans, rooftop solar loans and working capital loans, as well as micro loans against property in semi urban and rural India with an aim to provide sustainable financial inclusion.

To date, EFL has financed more than 75,000 machines, helping their customers transition to less energy-intensive production. In addition, EFL’s pioneering efforts in the rooftop solar credit market have helped many of these firms switch to rooftop solar power systems and its financing has already helped to save more than 50,000 metric tonnes of Co2 emissions over the last three years, while reducing energy costs for MSMEs.

Shilpa Pophale, Managing Director & CEO, Electronica Finance Limited, said: “With a strong track record and deep expertise in this segment, EFL remains committed to providing technology-based solutions and financial support to MSMEs that are powering India’s unprecedented economic growth. This association with two leading social impact investors can help us support small businesses to thrive and deliver resilient, low-carbon growth.”

Stewart Langdon, Partner, LeapFrog Investments, said: “Electronica Finance Limited is transforming India’s MSME sector through its sustainable financing solutions. Their funding plays a vital role in financial inclusion and climate resilience for small business owners who have long been overlooked by banks. The benefits of these loans go beyond the small business owner, catalysing job creation and supporting households and communities. We are delighted to have secured this fundraising round for Electronica Finance Limited and look forward to supporting Shilpa and the team as they continue to scale-up their presence across the country.”

Anurag Agrawal, Partner, Aavishkaar Capital said: “Electronica Finance Ltd has a proven track-record of providing innovative financing solutions for MSMEs and we are excited to be their partner as they enter their next phase of growth. Aavishkaar Capital’s India Fund VI is committed to channel capital to resilient businesses solving large problems and EFL’s diverse portfolio across MSME, climate and rural financing brings significant opportunity to bolster inclusive development. This investment will also underscore our commitment to the 2X Challenge in supporting businesses that promote gender equality and empowerment.” 

India’s MSMEs currently contribute 30% of the country’s GDP and 45%¹ of India’s total exported goods and yet MSMEs often have difficulty accessing credit, with the credit gap estimated at $530 billion². EFL aims to provide financial solutions to overcome the funding hurdles that have previously constrained growth for many Indian MSMEs, helping to achieve the government’s goal for MSMEs to contribute 50% of the country’s GDP and employ 160 million people by 2025³. EFL grew the number of its active borrowers from 18,000 in FY22 to 43,000 in FY24.

EFL seeks to establish long-term relationships with its customers to assist them in achieving transformational financial growth. For example, a Chennai-based customer supplying automobile and non-automobile components has availed 32 loans from EFL since 2005. With this support, the customer’s turnover has grown from ~$17,000 in FY05 to more than $31 million in FY24, and their headcount from three to 700.

EFL is focused on customer centric growth through technology across India, doubling its number of branches since FY22, with a focus on the country’s western, northern and southern regions.  Investec acted as the sole investment bank advising on the fundraise and JSA and Legalogic acted as the legal advisers.

The transaction will be closed after the 30-day regulatory notice period.

Headquartered in Pune, Electronica Finance Limited (EFL), a part of the SRP Electronica Group, was incorporated in the year 1990. With a legacy of over 30 years, EFL has successfully established itself as pioneers in the field of MSME Finance with a focus on machine finance and climate finance. Keeping in mind the overall philosophy of customer centricity and assessment-based financing, the company provides a comprehensive product portfolio – Machine Loans, Business Loans, Rooftop Solar Loans, Loan against Property, Institutional Lending, Working Capital Loan and loans to micro enterprises, catering to the financial needs of individuals, small business owners and medium-sized enterprises. It currently has an AUM of ~INR 4000 Cr with operations in 215+ branches across 15 states.

For more information, go to: https://www.electronicafinance.com/

LeapFrog invests in healthcare, financial services and climate solutions businesses in high-growth global markets. Its companies deliver distinctive impact and robust returns, growing revenues on average 24% a year. LeapFrog companies now reach 492 million people in 30 countries. The firm has raised billions of dollars from global institutional investors, including a recent $500m commitment by Temasek to LeapFrog and its growth equity funds. LeapFrog has twice been ranked by Fortune as one of the top Companies to Change the World and was named inaugural Pioneer in Impact by the FT and IFC at the Transformational Business Awards.

For more information, go to: www.leapfroginvest.com.

Aavishkaar Capital is an Impact fund manager focused on the Global South. A pioneer in taking an entrepreneurship-based approach to scaling businesses for impact, Aavishkaar Capital’s unique approach has resulted in its invested enterprises impacting over 136 million lives Aavishkaar Capital invests high environmental and social impact sectors across India, Emerging Asia, and Africa. Aligned to 13 out of the 17 Sustainable Development Goals, Aavishkaar Capital has successfully raised eight funds, while generating commercial returns with over c.$555 million in assets under management. 

Aavishkaar Capital is the impact investing arm of the Aavishkaar Group, the impact platform with presence in Microfinance, MSME Lending and ecosystem building across India, Emerging Asia and Africa. Aavishkaar Group with its vision to bridge the opportunity gap for the emerging 3 Billion, currently manages over  $1.3 billion in Impact Assets across its platform. www.aavishkaarcapital.in

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LeapFrog@Montfort.London