Mumbai: Japanese banking giant Mitsubishi UFG Financial Group (MUFG) has injected an additional amount ₹2,798 crore ($334 million) in digital lending firm DMI Finance Pvt. Ltd, a sign of growing interest from investors in Asia’s second-largest economy.
“India is a large market that is expected to see rapid economic growth, and where accelerated development of digital financial services is also anticipated due to the spread of the Internet and various policies promoting digitalisation,” MUFG said in its statement. This strategic investment in a major player in India’s digital financial services industry is aimed at further capturing growth in the area, it said.
MUFG has valued DMI Finance at $3 billion, making it the second-largest shareholder in the digital lender after DMI Limited, Mauritius.
The investment, made through its consolidated subsidiary MUFG Bank, brings the total money that the Japanese group has invested in DMI Finance to ₹4,712 crore rupees (approximately US$565 million), which is in addition to the US$400 million injected last April.
“We expect a lot of synergies not just in India but also across their portfolio companies. We are working with them and their portfolio companies in South East Asia for expansion and products and services,” said Shivashish Chatterjee, co-founder of DMI Group. “We are looking for patient capital to help us build a client base.” ₹“50,000-60,000 crore rupees in the next 15-20 years.”
Delhi-based DMI Finance is a digital non-banking financial company that offers loans to individuals and small businesses. It has disbursed over ₹18,000 crore in loans by the end of March 2024.
According to Chatterjee, DMI Finance plans to use the capital to expand its balance sheet. It aims to increase its lending to small and medium-sized businesses to 25% of total lending from 10% currently in the next 12 to 18 months. DMI Finance is also open to looking at acquisitions, he said.
“We are looking to grow our MSME portfolio as there is a structural need for increased credit for MSMEs. In consumer lending, our growth in FY25 is slower than in FY24, which is consistent with a period of contraction as we have passed the peak of consumer credit in this cycle,” Chatterjee said. “This is a cyclical episode which is necessary as it helps to skim the froth from the market.”
Over the past year, DMI Finance has acquired payments company Oxymoney, operated by Appnit Technologies Pvt. Ltd, and the ZestMoney platform.
According to ICRA ratings, DMI Group was initially engaged in secured corporate lending, primarily to real estate developers. However, it shifted its focus towards low-cost individual and affordable housing loans. As of March 31, 2024, the group’s overall loan portfolio, including DMI Finance and DMI Housing Finance, stood at ₹14,550 crore, of which 84% is in the form of consumer retail loans, 12% in affordable housing finance loans and the remaining 4% in wholesale loans.
In fiscal year 24, DMI Finance reported a net profit of ₹417 crores compared to ₹320 crore in FY23. Capital adequacy stood at 44.8 per cent as on March 31, 2024, down from 50.9 per cent in the previous year.
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