Non-bank lender to MSMEs, Profectus Capital has raised $25 million from International Finance Corporation through issue of non-convertible debentures, it said.

 This is IFC’s first investment to finance energy efficient machinery for MSMEs in India. Since the proceeds will be used to fund green assets, the NCDs have been labelled as green bonds, and Profectus Capital has developed a Green Bond Framework in line with International Capital Market Association’s Green Bond Principles. 

IFC’s support will enable Profectus Capital to scale up energy efficient equipment financing for MSMEs, which is key to India’s climate goals, it said in its release.

 IFC’s investment is complemented by advisory services under the European Union’s regional initiative Accelerating Climate Smart & Inclusive Infrastructure in South Asia program. As part of this, IFC will provide targeted advisory support to help the company identify EE assets in its current portfolio, build capacity of its operations teams and management, and create a growth plan, contributing towards reduced greenhouse gas emissions.

The investment by IFC would go a long way in aiding MSME capital investment in India, said K V Srinivasan, Founder, CEO & Whole-time Director of Profectus Capital. “Since the commencement of our operations in 2018, we have progressed well in all dimensions including business growth, asset quality, and profitability despite many macro headwinds. With IFC’s investment in our green bonds, we look forward to further consolidate our position in the MSME market,” he added.

 “IFC’s investment in this asset class will help develop the market for EE finance for small businesses,” said Wendy Werner, IFC Country Head for India.

“Green bonds are still relatively new borrowing instruments for financial institutions in India. Our partnership with Profectus will highlight the viability of commercial lending to the energy efficiency segment, fostering green, inclusive, and resilient growth,” she added.

 The lender said that though an estimated 65 million MSMEs in India contributed about 30 percent to the country’s GDP and about 40 percent to exports, the credit gap for the sector is estimated to be at Rs 25.8 trillion. Over half of them are manufacturing units who incur energy costs as high as 35-40 percent of their operating expenses. The projected energy consumption by MSMEs in the country is expected to more than double by 2030 to 72 metric tons of carbon dioxide equivalent from 30 metric in 2017. This provided a significant opportunity for energy savings through replacement of old machines with both new EE machines and retrofits. 

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