Money & Banking

With the latest $234-m fund-raise, Chennai-based NBFC Five-Star turns a unicorn

Our Bureau Mumbai | Updated on March 27, 2021

The investment will be made through a combination of primary infusion and secondary shares sales by existing investor Morgan Stanley Private Equity

Five Star Business Finance Ltd, a Chennai-headquartered non-banking finance company, has raised ₹1,700 crore ($234 million) from a consortium of global and Indian investment firms. The investment values the company at ₹10,300 crore ($1.4 billion).

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.

Five Star plans to use the capital to expand its lending business, the company said in a statement.

“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,” D Lakshmipathy, Five-Star Business Finance Chairman and Managing Director D Lakshmipathy said.

Mix of investments

The investment will be made through a combination of primary infusion and secondary shares sales by existing investor Morgan Stanley Private Equity. The company’s other existing investors – Martix Partners and TPG Capital – will continue to stay invested.

“The company is a true pioneer in the market having supported the growth 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 Lakshmipathy and his team to build on Five Star’s long-term success,” Gaurav Trehan, Partner at KKR, said.

KKR’s investment, which is a part of its global impact strategy, marks KKR Global Impact Fund’s second investment in India and fifth in Asia Pacific.

Five Star looks to bridge the funding gap in the industry, which has about 60 million MSMEs, employs about 125 million people and accounts for more than 30 per cent of India’s GDP.

Published on March 26, 2021

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