Partners Group's Strategic Play in India's MSME Sector: A Roadmap for Long-Term Growth

India's economic landscape is undergoing a transformative shift, driven by the rapid expansion of its micro, small, and medium enterprises (MSMEs). These businesses, which account for nearly 30% of India's GDP and employ over 110 million people, are increasingly turning to non-bank lenders for tailored financing solutions. Against this backdrop, Partners Group's acquisition of a majority stake in Infinity Fincorp Solutions emerges as a shrewd strategic move to capitalize on this growth while leveraging its operational expertise. This deal positions investors to benefit from India's economic momentum while riding the tailwinds of digitalization and government support for MSMEs.

The Strategic Rationale: Aavas to Infinity—A Proven Model Reimagined

Partners Group's track record in scaling private lenders is well-documented. Its acquisition of Aavas Financiers in 2016 and subsequent exit in 2025 exemplifies its ability to transform undervalued assets into high-growth engines. Aavas, which grew its assets under management (AUM) 12x during Partners Group's ownership, offers a blueprint for Infinity. Both companies share a focus on underserved markets: Aavas targeted affordable housing in rural areas, while Infinity serves MSMEs in Tier 2 and 3 cities.

The parallels are striking. Infinity operates in a sector that is 70% underserved by traditional banks, yet it has already achieved a 59.5% AUM growth in FY2024, reaching INR 108.27 billion (~USD 1.24 billion). With a target to hit INR 400 billion by 2027, the scalability is undeniable. Partners Group's plan to accelerate branch expansion—from 120 to over 200 branches by 2026—mirrors its strategy with Aavas, which expanded its branch network from 100 to 397 locations during its tenure.

Tailwinds for MSME Credit Demand: Digitalization and Policy Support

The MSME sector's growth is amplified by two critical forces: digital infrastructure and government initiatives. India's push for digital payments, SME digitization programs, and the INR 100 trillion infrastructure pipeline by 2030 are creating a fertile environment for credit demand. Infinity's focus on small-ticket, property-backed loans (INR 3.5–4 lakh) aligns perfectly with this shift.

Moreover, the Indian government's MSME Credit Guarantee Fund and relaxed collateral requirements for loans under INR 25 lakh have reduced lending risks. This environment allows Infinity to operate with a 42.71% capital adequacy ratio, well above the regulatory minimum, while maintaining a 3.4% non-performing asset (NPA) ratio—a testament to disciplined risk management.

Operational Synergies: Tech-Driven Efficiency and Customer Experience

Partners Group's value creation plan hinges on operational upgrades. The firm aims to invest in technology infrastructure to streamline loan processing, reduce turnaround times, and enhance customer engagement. For example, Aavas's digitization efforts reduced loan approval times from 14 days to 7 days—a model Infinity could replicate.

The addition of AI-powered credit underwriting and branchless lending channels will further unlock efficiencies. These initiatives not only boost profitability but also position Infinity to compete with digital-first lenders like ZestMoney and Capital Float.

Investment Case: Long-Term Exposure to India's Growth Story

This acquisition is a multi-year bet on India's economic ascent. The MSME sector's USD 1 trillion+ potential by 2027, paired with Partners Group's proven ability to scale financial institutions, creates a compelling risk-reward profile. Key catalysts include:
1. Regulatory approvals: While pending, the deal's structure (primary + secondary stakes) and Partners Group's prior exits (e.g., Aavas, Vishal Mega Mart) suggest a smooth path to closure.
2. Geographic expansion: Infinity's current dominance in Andhra Pradesh, Telangana, and Tamil Nadu (75% of AUM) leaves room to penetrate newer markets like Maharashtra and Gujarat.
3. Partners Group's operational playbook: Its track record of improving EBITDA margins by 15–20% in portfolio companies through cost optimization and top-line growth bodes well for Infinity's financial trajectory.

Risks and Considerations

The deal is not without challenges. Regulatory delays (though unlikely given Partners Group's familiarity with Indian processes) and macroeconomic headwinds (e.g., inflation, interest rate hikes) could pressure loan demand. Additionally, competition from digital lenders and banks like Bandhan Bank may intensify. However, Infinity's low-cost branch model and property-backed loan focus mitigate these risks.

Conclusion: A Compelling Play for Patient Capital

Partners Group's acquisition of Infinity Fincorp is a masterclass in strategic exposure to India's structural growth drivers. By leveraging its operational expertise, the firm is poised to scale Infinity into a regional leader in MSME financing—a sector primed for exponential growth. Investors seeking long-term exposure to India's economic transformation, paired with active management, should view this as a compelling opportunity. As the old adage goes: “Banks make money when they grow, but good banks make money when they grow smart.” Infinity, with Partners Group at the helm, is set to do just that.