Elevar Equity Presentation to SVMN 2009.03.19


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Maya Chorengel of Elevar Equity presented this material at the Silicon Valley Microfinance Network speaker event March 19, 2009 at the Omidyar Network offices in Redwood City, California.

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  • Elevar Equity Presentation to SVMN 2009.03.19

    1. 1. Financing the Microfinanciers How MFIs are Sourcing Capital Maya Chorengel Managing Director, Elevar Equity
    2. 2. DATA: The numbers are still small <ul><li>As of December 2007 assets under management for MIVs totaled $5.5 billion with approximately $850 million of assets invested in equity* </li></ul><ul><li>Average size of equity investment in December 2007 sample: $3 million for mutual funds and $1.2 million for actively managed structured finance vehicles </li></ul><ul><li>As of December 2008, there were 24 specialized microfinance equity funds with total assets of $1.5 billion** </li></ul><ul><li>December 2008 study tracked 144 equity transactions between 2005 and 2008 with a total equity value of $297 million and average transaction size of $2.1 million </li></ul><ul><li>* From CGAP September 2008 Report “CGAP 2008 MIV Survey Main Findings” </li></ul><ul><li>** From CGAP / JP Morgan February 2009 Report “Shedding Light on Microfinance Equity Valuation: Past and Present” </li></ul>1 Confidential
    3. 3. When are MFIs ready for Equity: Blue Orchard Slide Take 2 2 Table prepared by Unitus, Inc.
    4. 4. Different Types of Equity Investors <ul><li>Multilateral Institutions – DEVELOPMENT </li></ul><ul><ul><li>Institutional development objectives guide investment targets and criteria </li></ul></ul><ul><ul><li>Invest larger dollar amounts in fewer transactions </li></ul></ul><ul><ul><li>Balance development objectives with financial performance </li></ul></ul><ul><ul><li>Reputation for being “bureaucratic” / “procedure oriented” </li></ul></ul><ul><li>Social Investors – SOCIAL MISSION </li></ul><ul><ul><li>Invest equity capital to support growth and outreach of MFI </li></ul></ul><ul><ul><li>Concerned with mission of MFI </li></ul></ul><ul><ul><li>More concerned with social return than financial return </li></ul></ul><ul><li>Commercial Investors (passive and active) – IRR </li></ul><ul><ul><li>Concerned with financial return and eventual liquidity </li></ul></ul><ul><ul><li>“ Active” investors are more “muscular” in terms of board representation and exercising shareholder rights to preserve and augment company value </li></ul></ul><ul><ul><li>Portfolio investors or backers of management teams </li></ul></ul>1 Confidential
    5. 5. What Environments Best Fit Commercial Equity? 2 <ul><li>Regulatory environment - and political and economic environments - supports equity investments and shareholder rights </li></ul><ul><li>MFIs must be constituted as for profit entities </li></ul><ul><li>MFI management teams must be “culturally ready” to accept investors </li></ul><ul><ul><li>Implications for governance and board representation </li></ul></ul><ul><ul><li>Implications for transparency </li></ul></ul><ul><li>MFI business plans must address creation of shareholder value in addition to other goals </li></ul><ul><li>MFI must address investor need for liquidity </li></ul>
    6. 6. Challenges in the Current Environment 2 <ul><li>Supply of “equity investment ready” MFIs </li></ul><ul><li>Supply of equity, especially “responsible” equity capital </li></ul><ul><li>Equity capital markets </li></ul><ul><li>Valuation </li></ul><ul><ul><li>Pre-crisis valuations of 1.3x – 1.9x book (historical) and 7.2x – 7.9x earnings (historical) will settle at what </li></ul></ul><ul><ul><li>To what extent was the rise in valuations in 2008 a demand/supply issue rather than an intrinsic value issue. Will there be down rounds and how will they be managed? </li></ul></ul><ul><ul><li>How to calibrate geographic differences in pricing: e.g. India multiples vs Latin American multiples </li></ul></ul><ul><li>Unclear when window for exits will open post crisis </li></ul>