Impact equity investor Lok Capital plans to launch an impact debt fund by June. It is in the process of raising about ₹325 crore ($50 million) from domestic and international investors.

“We are talking to two-three anchor investors,” said Vishal Mehta, co-founder and Partner, Lok Capital.

The debt fund, called Lok Impact Debt Fund, will be targeted at the same sectors, including financial inclusion, healthcare and agriculture, that Lok Capital invests in through equity.

Prashant Thakker, who was the global head of Standard Chartered Bank’s microfinance business, has joined as Managing Partner of the impact debt fund.

Mehta said Lok had started marketing the debt fund, which will target SMEs in the social sector. The debt fund is part of Lok’s strategy to diversify its offering to the impact sector.

Since it’s founding in 2004, the impact investor has raised two funds — Lok I was $22 million and Lok II $65 million — which have been deployed.

The third fund, Lok III, has so far raised $90 million and the firm is waiting for a couple of important investors to close it at $100 million. It has started investing out of the third fund and nearly 60 per cent of the money has been committed, according to Mehta.

Thakker said Lok started going to the market with its impact debt in the last quarter of the previous year. It has been talking to development finance institutions, lending agencies and family offices in India and abroad to raise the money for the debt fund. It hopes to achieve first close by June.

Thakker said Lok will typically lend ₹3-10 crore for two-five years at 14-16 per cent interest. There has been a huge demand and appetite for impact debt. A couple of other institutions also provide debt to the impact sector, such as Northern Arc Capital (till recently IFMR Capital), which largely lends to the financial inclusion sector; Intellecap group; Caspian Impact, and Manaviya Investments and Holdings, an NBFC that also lends to the financial inclusion sector.

He said the debt fund will be a seven-year fund with a five-year investment period and the principal will be repaid to the investors in the sixth and seventh years.

The impact fund could invest in the ventures in which Lok Capital is putting in equity, but only after going through its own appraisal process.

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