Profectus Capital, a non-banking financial company that supports MSMEs, secured $25 million (approximately ₹205 crore) through non-convertible debentures (NCDs) issued to the International Finance Corporation (IFC), a World Bank Group. This milestone represents IFC’s inaugural investment in financing energy-efficient (EE) machinery specifically for MSMEs in India.
The fund obtained, dubbed green bonds, would be used to construct eco-friendly assets, helping India meet its sustainability targets. Profectus Capital has designed a Green Bond Framework that is consistent with the International Capital Market Association's Green Bond Principles, ensuring that funds are directed towards beneficial, sustainable initiatives. IFC’s investment will support Profectus Capital's aim to expand its EE equipment financing, helping MSMEs lower their energy costs while contributing to a greener future.
IFC will also give expert advising help to Profectus Capital in identifying existing EE assets, improving operational capacity, and developing a strategic expansion plan to reduce greenhouse gas emissions. K.V. Srinivasan, Founder, CEO, and Whole-time Director of Profectus Capital, highlighted the importance of this collaboration, stating, "This partnership is monumental for us as it marks IFC’s first investment in India dedicated to funding energy-efficient equipment for MSMEs."
Srinivasan emphasised Profectus Capital's resilience since its launch in 2018, noting its steady progress in growth, asset quality, and profitability, despite challenging economic conditions. “With IFC’s green bond investment, we are well-positioned to strengthen our foothold in the MSME sector and support capital investment across India,” he added.
India's MSME sector, with over 65 million firms, accounts for 30% of GDP and 40% of exports. However, there is a funding shortfall estimated at ₹25.8 trillion (about $311 billion). Many MSMEs, particularly those in manufacturing, experience high energy costs, which can account for up to 40% of total operating expenses. The sector's energy usage is predicted to exceed 72 metric tonnes of CO2 equivalent by 2030, up from 30 metric tonnes in 2017.
According to Profectus Capital, replacing obsolete gear with advanced, energy-efficient equipment has the potential to significantly reduce energy consumption and emissions. Wendy Werner, IFC’s Country Head for India, expressed optimism about the green bond investment, noting, “This funding will support India’s climate objectives by making energy-efficient financing accessible to small businesses, creating jobs, and enhancing MSME competitiveness. As a relatively new financing tool in India, green bonds can unlock new opportunities for financial institutions and promote sustainable growth across sectors.”
This pioneering investment by Profectus Capital and IFC lays the groundwork for a more energy-efficient MSME ecosystem in India, opening the door for other sustainable finance efforts across the industry.
