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Extends the first Rupee subordinated loan of 350 million in India

Mumbai, July 22, 2002—
As part of its efforts to provide clients in India with long-term local currency financing, the International Finance Corporation—the private sector lending arm of the World Bank Group—has signed an agreement to provide a financing package of Indian Rupees 840 million (US$17 million equivalent) to Mahindra & Mahindra Financial Services Limited (MMFSL), a leading financial services provider.  Consisting of a subordinated loan of  Indian Rupees 350 million ($7 million equivalent) and a senior loan of Indian Rupees 490 million ($10 million equivalent), IFC’s financing package marks its first Rupee subordinated loan and its second Rupee loan in India.

MMFSL will use IFC’s loan to develop new businesses, including the distribution of insurance products, the financing of new and second-hand vehicles, and purchases for agricultural inputs.  As a leading financial services provider, MMFSL provides hire purchase financing throughout rural and semi-urban India through its wide network of over 150 branches.  Majority-owned by Mahindra & Mahindra, MMFSL has a paid-up capital of Indian Rupees 606 million.  In financial year 2002, the company disbursed loans of over Indian Rupees 11 billion making a profit before tax of Indian Rupees 434 million.

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 MMFSL 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 improving access to financial products in India by systematically providing debt and equity financing to leading financial service providers in the market.

Mr. Loy Pires, Head of IFC’s Mumbai Office 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 MMFSL will also allow the company to expand its presence in rural India and improve the access to financial and insurance products for rural customers."

Mr. Bharat Doshi, Executive Director and President, Trade and Financial Services, M&M responded, “We are delighted that MMFSL is the recipient of IFC’s first Rupee Subordinated Loan in India.  We view this project as an opportunity to satisfy the growing demand for asset financing and insurance in rural areas and will fully utilize IFC’s financing to bring longer term financial products to rural India.”

Mr. Ramesh Iyer, Managing Director, MMFSL added, “We are happy that a multilateral financial agency of the stature of IFC has chosen to partner with us.  This will enable us to widen our reach in rural India and provide tailor-made financial products in line with our future growth plan”.

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.

Mahindra & Mahindra Financial Services Limited