| Company | GuarantCo |
| Sector | Transportation |
| Country | India |
| Total Project Cost | USD 11m |
| PIDG Commitment |
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| Dates of PIDG involvement |
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The upfront capital cost of electric vehicles (EVs0 is approximately double that of their internal combustion engine counterparts. Due to the perceived nascent stage of the EV market in India, financial institutions consider it high-risk for lending, resulting in elevated interest rates and low loan-to-value ratios. In 2019, banks held 56 per cent of the market share for EV financing, with the remaining significant portion funded by non-banking financial institutions (NBFIs). As such the EV market in India can be classified as moderately underdeveloped. To tackle this challenge, it is essential to support companies in proving viable business models based on EV systems.
PIDG provided a partial (65 per cent) guarantee for an INR 1.5 billion (c. USD 17 million) listed green bond issuance by Muthoot Capital Services Limited (MCSL), one of India’s leading publicly listed non-bank financial institutions. The proceeds of the bond will be used by MCSL to provide loans to consumers, primarily from rural locations, for the purchase of electric two-wheelers, thereby fostering the growth of the EV ecosystem beyond India’s metro cities.
The transaction is expected to support around 57,000 end users in purchasing an EV, with almost 23,000 expected to be women. These end-users are predominantly from rural areas and have historically been underserved. Indeed, 50 per cent are expected to be accessing credit for the first time.
This transaction will not only help MCSL diversify its funding sources away from commercial banks to include institutional investors but also enables the company to tap into longer-tenor liquidity of six years.
Muthoot aims to disburse 40 per cent of the loan portfolio to women.
