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India-based small business financier Five Star Business Finance has concluded a $243 million investment round from a consortium of global and Indian investment firms.
The round included investment by existing investors in the company led by Sequoia Capital India, with participation from Norwest Venture Partners, and new investors led by KKR with participation from TVS Capital.
“The investment will be made through a combination of primary infusion in the Company and secondary shares sold by existing investor Morgan Stanley Private Equity,” The company said.
“Other existing investors as Matrix Partners and TPG Capital will continue to stay invested,” it added.
Five Star Business Finance plans to deploy funding for the expansion of its lending business.
Speaking on the fundraise, D Lakshmipathy, Chairman and Managing Director of Five Star, said, “In our mission of ‘Funding the unfunded,’ we have created a niche for ourselves empowering small businesses and the self-employed across corners of India by providing them with reliable and responsible funding alternatives. We aim to achieve this social goal through grass-root efforts without compromising on the pillars of asset quality and profitability that are needed to build a sustainable institution of scale.”
“We are grateful to our existing investors – Sequoia Capital India and Norwest for further reposing their faith in us, and we are particularly excited to welcome our new investors – KKR through its Global Impact Fund, which shares our mission of financial inclusion – and TVS Capital, backed by one of the most respected business houses of South India,” Lakshmipathy said.
“We are greatly thankful to Morgan Stanley Private Equity fund and specifically Arjun Saigal, for having been one of our earliest backers and it is immensely satisfying to have been able to provide them with an excellent financial return,” he added.
Commenting on the investment in Five Star, G V Ravishankar, Managing Director, Sequoia India, said, “Sequoia Capital India is delighted to be investors in Five Star and is strong believers in their business model that bridges the large credit gap that exists for small and micro-enterprises. The strength of the founder and the management team, along with the credit processes are visible in how the company has navigated several small and large disruptions including demonetization, GST, and now Covid-19 related challenges. The firm is happy to strengthen its partnership with Five Star as the company embarks on its next leg of growth – from being successful to becoming significant in the industry.”
“We are delighted to be deepening our partnership with Five Star as they reach 10x of the scale compared to when we first invested. Led by the vision of Mr. D Lakshmipathy, Five Star has executed exceptionally towards its goal of funding and empowering micro-business entrepreneurs across India in a scalable way. Five Star is well-loved by its customers and continues to have the finest asset quality together with strong growth and robust profitability,” Niren Shah, Managing Director, Norwest India added.
Further adding to the statement, Gaurav Trehan, Partner at KKR, said, “The company is a true pioneer in the market having supported the growth of MSMEs for decades, playing an important role in India’s economy. Five Star is a terrific example of the type of solutions-oriented business that KKR looks to support through its Global Impact strategy and in India, and we look forward to working with Mr. Lakshmipathy and his team to build on Five Star’s long-term success.”
“Five Star has positioned itself as the best-in-class MSME lender in India’s “missing middle” with supreme operational efficiency, appreciating the on-ground realities faced by self-employed own-account enterprises. In its continued pursuit of empowering next-generation entrepreneurs, TVS Capital is proud to partner with Shri Lakshmipathy, joining him in his vision of building Five Star into a pan-India preferred MSME lender through a continued focus on execution excellence and digital initiatives,” Gopal Srinivasan, Managing Director, TVS Capital, added.
KKR’s investment is part of its Global Impact Strategy and marks KKR Global Impact Fund’s second investment in India and fifth in the Asia Pacific.