Norwest invests $25m in Indian retail finance

The venture firm has acquired an 8% stake in Shriram City Union Finance, marking its fourth Indian deal this year.

Palo Alto-headquartered venture firm Norwest Venture Partners (NVP) has invested INR1.2 billion ($24.6 million; €17.5 million) for a stake of around 8 percent in Shriram City Union Finance. The investment in the retail finance arm of India’s Shriram Group was made through a block purchase of shares on the secondary market.

Established in 1986, Shriram City is a non-banking financial services company that currently has more than 1.5 million customers. The company specialises in small-scale retail finance and offers financing for consumer durables, vehicles, personal loans, small business loans and retail goal loans.

“The size of the consumer finance market is expected to grow significantly over the next four to five years in India,” Niren Shah, managing director of NVP India, said in a statement. He added that the company is well-regarded and has the track record in the financial sector to “capitalise on this vast macro opportunity”.

In December 2008, TPG acquired a 55 percent stake in Shriram Retail, Shriram Finance’s holding company, for $162 million. It had originally offered to pay $130 million for a 49 percent stake in the company in September, which would have given the global buyout firm a stake of 26.7 percent in Shriram City.

Other private equity firms that have invested in Shriram City include ChrysCapital, ICICI Venture, Bessemer Venture Partners and Merrill Lynch’s private equity arm. As of 31 March 2009, private equity investors owned a combined stake of 34 percent in the company.

NVP has expanded its focus in India to include late stage venture and growth investments. In June, it bought a 2.11 percent stake in the National Stock Exchange of India for INR2.5 billion. Three months prior to that, it acquired a stake of less than 5 percent in OnMobile, a telecom service provider, for about INR770 million.

Some of the firm’s other direct investments in India include Adventity, a knowledge process outsourcing company; Persistent Systems, a software development company;, an online community and networking website; and Yatra, an online travel services company. NVP has also made 20 investments in cross-border portfolio companies that operate in both India and the US.

NVP manages assets of more than $2.5 billion. In India, the firm has offices in Bangalore and Mumbai.