Unitus Capital–Helping Businesses in Financial Inclusion Space

Abhijit Ray

Unitus Capital has in-depth expertise in handling investor relationships and insights, maximising engagement of impact aligned investors, and streamlining execution of raising capital. As an advisor to the clients, it has provided insightful and actionable advice on mergers and acquisitions, financial restructurings, and other strategic and financial matters, says Abhijit Ray, Co-founder and Managing Director of Unitus Capital, in conversation with Elets News Network (ENN).

Unitus Capital has completed 11 years of its operation in India. How has been the journey so far?

Abhijit Ray
Abhijit Ray, Co-founder and Managing Director of Unitus Capital

Challenging, exhilarating, overwhelming, and greatly satisfying! In 2008, when Eric (my fellow Co-founder and Chief Executive Officer) and I joined hands to launch Unitus Capital (UC), our aim was to help businesses in the financial inclusion space to raise institutional equity and debt by putting professional team in place, organised structures and reporting, improve corporate governance practices, help understand the investment thesis and approach of institutional investors, and how to work with them.

Later, this transformed into arranging capital for all types of businesses that work with the mass markets to provide affordable products or services or help in preserving and conserving nature. The name Unitus signifies our intention to “unite” the haves and the have-nots.

This was also the time when renowned investment banks across the world imploded, which had a cascading effect on the financial services sector everywhere. In the beginning, UC started raising capital for the Micro Finance (MF) Industry Within a short time of commencing work with Microfinance Institutions (MFIs), the Andhra Pradesh MFI crisis struck.

However, UC maneuvered the difficult phase and now, in the 11th year of operations, I am happy to state that Unitus Capital has become a name to reckon as the Investment Banker of choice for investors and businesses which are not only scaling very fast but also creating great social, environmental and financial impact through their work.

During the last decade, we have been able to arrange capital for multiple sectors including microfinance, affordable housing finance, Micro, Small and Medium Enterprises (MSME) lending, agrifinance, education finance, affordable healthcare, affordable education, agriculture, renewable energy, and women empowerment etc. Looking back, I am proud that we have been able to accomplish so much within such short time span by helping more than 100 impactful businesses in raising over US$ Two billion of equity as well as led the investment banking deals table in India in terms of largest number of deals makers, for the past five years in a row.

Your vision is to deliver capital and change lives. What services do you offer in a bid to accomplish this aim?

Unitus Capital (UC) is a boutique investment bank that facilitates access to capital for businesses to innovate and scale, as well as deliver deep social and environmental impact. Our services can be broadly classified into three major categories: Equity Debt,Structured Products, and Advisory. On the equity side, Unitus Capital offers end-to-end services to businesses at various stages of their life cycle, right from early to growth stages, as well as mature businesses. UC works closely with clients in preparing collaterals to reach out to potential investors, identifying such investors, negotiating term sheets and transaction documents, and compliance of conditions precedent, and finally facilitate the closing of the investments.

On the debt side, UC is involved in raising term loans (secured and unsecured), as well as subordinated debt and working capital facilities from domestic and international debt investors. This includes commercial banks, Non-Banking Financial Companies (NBFCs), Small Finance Banks (SFBs), Development Finance Institutions (DFIs), Micro Investment Vehicles (MIVs), Socially Responsible Investors (SRIs) and Family Offices.

UC has helped clients to raise funds through Non- Convertible Debentures (NCDs) (listed and unlisted), External Commercial Borrowings (ECBs), securitisation of the portfolio, assignment transactions, rated loan pool sale, loan portfolio sale, etc. In many instances, UC was the sole arranger of multiple issuances of non-convertible debentures and external commercial borrowings for various businesses.

Non-Banking Financial Companies (NBFCs) are going through challenging times. What is your view pertaining to their future in India? The liquidity issues in the NBFC sector occurred during a year that was best in terms of performance as far as the sector was concerned.

The said liquidity situation is a wake-up call for the sector to conserve capital, possess a strong equity base, be adequately leveraged (and avoid stretching leverage ratios), and curb unnecessary expenditure. The Reserve Bank of India has stepped in at the right time to address the difficult situation by reducing the minimum holding period requirement for NBFCs raising funds via securitisation of loans of original maturity above five years.

This also came at a time when many of Public Sector Undertaking banks are under PCA and many others plagued by their own Non-Performing Assets (NPA) levels resulting in most of the Banks reducing their lending to the retail, Housing and SME sector. However, many of the well-run NBFCs were still able to raise debt, albeit with slightly higher interest rates and shorter maturity period.

In my opinion, the worst for the NBFCs is over and I foresee continued funding and strong growth for the sector in years to come. We also need to appreciate that most NBFCs— especially MFIs, MSME lending entities, affordable housing finance companies, etc. — fill a vital gap in making funds available to segments that otherwise lack easy access to institutional credit and majority of them have been able to service their debt on time despite the tight liquidity situation in the market.

Apart from non-banking, your operations are spread across education and dairy sector as well. What new innovations have your initiated or planning to implement in the above sector?

UC has worked with numerous businesses engaged in education, agriculture, healthcare, and dairy sectors. Apart from advising entities that provide financial services to families to help meet fee-related expenses of their children, UC has worked with innovative organisations that structure educational programmes for the disadvantaged and provide training/employment opportunities to the differently abled people. UC has also worked with businesses that made learning easier for students in affordable private schools as also in Government schools.

In the agriculture sector, UC has worked with entities that are providing value-added services to farmer producer organisations in agri supply chain management. UC has also worked with dairies, especially in the eastern States of India, to help raise equity and identify strategic partners to expand their dairy processing capacity, deliver value-added milk products, improve distribution outreach, and set up chillers in remote rural areas to bring in more dairy farmers within their ambit. UC has done great work in the healthcare sector, by raising capital for companies which manufacturer low costs stents/ catheters and low-cost ophthalmology devices for five tests of the eyes. UC has also worked with maternity hospitals that offer pre-and post-natal healthcare facilities and traditional medicinal therapies, as well as expanded outreach of diagnostic services through technologically enabled point-of-care devices.

The founders of Unitus Capital have also facilitated setting up UC Inclusive Credit (UCIC) Private Limited, a NonBanking Finance Company (NBFC) for providing innovative debt products to impactful businesses in the areas of agriculture, education, financial inclusion, healthcare, renewable energy, and women empowerment. UCIC has commenced operations after receiving necessary statutory approvals from RBI and has already begun disbursing loans to those type of businesses.

Tell us about the latest tech-driven implementations planned for 2019.

Fintech is a fast-emerging sector in India. The expansion of telecommunications and internet network across the country, availability of smartphones even in remote corners of the country, the government’s Jan Dhan Yojana for bringing in the unbanked sections of population in formal banking channels, and uptick in technology-enabled payment channels have resulted in a range of services available to customers through technology-driven processes and systems. This has enabled an entire ecosystem of interesting business ideas to provide various services including credit scores, funds for meeting short-and long-term financial needs, savings and investment options, healthcare and fitness services, travel and tourism, etc. Rapid advances in artificial intelligence, machine learnings and blockchain technologies will see more sophisticated services being offered to customers in the days to come.

UC is also seeing an increasing trend of established tech players looking at becoming aggregators of products and services as also building their lending books. Many international investors, including large VC and PE funds from China, focused on fintech companies, are actively looking at India as the next frontier in fintech. At Unitus Capital, we’re working closely with such investors and fintech companies to make innovative capital available for fintech companies.

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