Partners Group Acquires Majority Stake in Infinity Fincorp, Betting on India’s MSME Lending Boom

Capital Utilization Strategy

Infinity will deploy the primary capital across three strategic vectors: geographical expansion targeting 200 new branches by 2027, proprietary fintech development for automated credit scoring, and customer acquisition infrastructure in Tier 3 cities[2][6][17]. This aligns with Partners Group’s operational value-creation playbook previously implemented at Aavas Financiers, where technology investments reduced loan disbursement cycles by 40%[4][11]. The capital structure positions Infinity for accelerated growth with 62% capital adequacy ratio – quadruple regulatory requirements – providing leverage capacity to expand its loan book to ₹2,400 crore ($288 million) by 2026[16][17].

Market Opportunity: India’s MSME Credit Revolution

India’s MSME sector presents a $400 billion addressable credit gap growing at 16% CAGR, with traditional banks serving less than 30% of the market due to underwriting limitations for informal businesses[2][13]. Infinity specializes in secured loans against property for micro-entrepreneurs – tea stall owners, vegetable vendors, electricians – with average ticket sizes of ₹500,000 ($6,000) and yields exceeding 20%[4][10]. This segment benefits from quadruple tailwinds: government’s Udyam registration formalizing 15 million MSMEs, GST compliance enabling digital underwriting, rising financial inclusion in Tier 3 cities, and RBI’s priority sector lending mandates[3][6][13].

BCG’s 2025 NBFC report confirms the sector’s outperformance with 20% YoY credit growth versus banks’ 12%, driven by gold-backed NBFCs and MSME specialists like Infinity[13]. The firm’s strategic positioning in manufacturing-intensive states like Gujarat and Maharashtra provides exposure to India’s $1.3 trillion industrial growth corridor, where MSMEs contribute 45% of manufacturing output[3][6].

Partners Group’s India Strategy: Sector Specialization

This transaction extends Partners Group’s $2.5 billion India portfolio with a specialized financial services thesis, echoing previous successful bets on Aavas Financiers (affordable housing) and Vishal Mega Mart (retail)[3][11]. The firm demonstrates consistent pattern recognition in targeting structural gaps: MSME lending represents Partners Group’s fourth Indian financial services investment following exits from Aavas (3x return) and Ecom Express[4][11]. Their operational blueprint involves embedding portfolio directors to optimize three leverage points: technology integration (reducing NPA through IoT collateral monitoring), cross-selling (introducing insurance products), and geographic clustering (optimizing branch density)[4][18].

Vageesh Gupta, Partners Group’s Managing Director for Private Equity, emphasized the thesis: “The MSME segment contributes 30% of India’s GDP yet remains critically underserved. Non-bank lenders like Infinity combine hyperlocal underwriting with flexible structuring – capabilities traditional banks cannot replicate at scale”[1][6]. This conviction manifests in Partners Group’s sector concentration, with financial services now comprising 40% of their $8 billion India portfolio following recent exits from consumer and logistics assets[11][19].

Competitive Landscape and Industry Implications

The transaction occurs amid unprecedented NBFC consolidation, with UGRO Capital’s $168 million acquisition of Profectus Capital and Trident Growth Partners’ $24 million investment in Credit Wise Capital signaling sector maturation[4][13]. Partners Group prevailed over Advent International and Creador in the competitive auction, valuing Infinity at 4.5x FY25 projected book value – a 30% premium to listed NBFC peers[9][10]. This valuation reflects Infinity’s secured loan model (100% collateral coverage) and niche focus: 85% of borrowers are first-time formal credit users in districts with bank density below national average[4][16].

The deal accelerates three industry trends: global capital favoring specialized lenders over universal NBFCs, private equity ownership extending pre-IPO runway (contrast with Five Star’s rushed listing), and technology becoming the core differentiator in underwriting efficiency[13][16]. With RBI’s new digital lending guidelines creating entry barriers, scaled players like Infinity gain structural advantages through data accumulation across credit cycles[13].

Operational Integration and Growth Roadmap

Infinity founder Shrikant Ravalkar will retain operational leadership, leveraging Partners Group’s global resources to implement four transformation pillars: IoT-enabled collateral monitoring replacing physical audits, predictive analytics for cash flow-based lending, automated credit committees reducing approval times from 72 to 4 hours, and API integrations with GSTN for real-time business verification[2][6][17]. The expansion prioritizes cluster-based scaling in existing states before new market entry, with Gujarat and Madhya Pradesh targeted for 50 new branches by Q2 2026[3][16].

Technology investment focuses on three systems: mobile app for borrower self-service (reducing branch dependency), AI-powered collection optimization, and blockchain documentation – initiatives projected to reduce operational costs by 15% while expanding margins[2][17]. The roadmap targets 35% CAGR through 2028, with ROE expansion from 14% to 22% via cross-selling high-margin products like equipment financing and working capital loans[16][17].

Conclusion: Blueprint for Financial Inclusion Investing

Partners Group’s strategic acquisition provides a replicable model for private capital targeting financial inclusion: identify structural gaps in formalization (India’s 63 million unregistered MSMEs), partner with category specialists demonstrating unit economics (Infinity’s 95% collection efficiency), and deploy technology to overcome traditional scaling constraints[2][4][13]. The transaction signals deepening sophistication in India’s private equity landscape, moving beyond generic financial services bets toward specialized operators addressing specific market failures.

For global investors, this underscores India’s MSME finance sector as a $50 billion private equity opportunity through 2030, with exit visibility through both strategic sales (like UGRO-Profectus) and public listings[4][13]. Partners Group’s parallel investments in Darwinbox and fintech infrastructure suggest an emerging ecosystem approach – building interoperable capabilities across their portfolio[3][19]. As RBI’s regulatory framework matures, expect increased capital deployment in secured lending models combining high margins with social impact, particularly in underpenetrated states where Infinity now holds first-mover advantage.