Social venture fund Lok Capital and one of its limited partners have recently invested approximately $5 million in IFMR Rural Channels, an organisation that invests in companies that can have an impact on financial services access. The investment will enable IFMR Rural Channels to build Kshetriya Gramin Financial Services (KGFS), which offers savings, remittance, insurance, and small loans and investments in remote rural locations. The Economic Times article points out that this indicates an increase in social venture capital in the sector after a limited number of deals in 2011.
BANGALORE: Mumbai-based Lok Capital and one of its limited partners have together invested $5 million ( 26 crore) in IFMR Rural Channels for an undisclosed stake, underscoring the return of impact investing by venture capital firms after a lean 2011.
Lok Capital’s series A investment in IFMR Rural Channels, which will be paid out in a single tranche, will be used for building Kshetriya Gramin Financial Services which offers financial services in remote rural locations.
The KGFS portfolio includes savings, remittance, insurance, small-ticket loans and investments using a wealth management approach for low-income consumers. At present there are about five KGFS centres serving 10 districts across Tamil Nadu, Orissa and Uttarakhand.
The latest investment by Lok Capital is the third such from its second fund. Last year, in September it had invested $3 million in rural business process outsourcing firm Rural Shores, and also participated in urban microfinance venture, Ujjivan’s fifth round of equity financing.
The development also draws attention to the fund of funds investment strategy being increasingly utilised by risk capital in India, as they look to diversify their portfolio and significantly raise their assets under management. Earlier in the month, early-stage investment fund Kae Capital raised $25 million from a number of marquee venture capital firms which includes impact investment firm Omidyar Network.
Venture capital firms are making a cautious return to investing in the country’s social enterprises, after the turmoil in the microfinance sector and concerns over corporate governance saw them adopt a rather hands-off approach. This was in spite of 2011 being perceived as a blockbuster year for venture capital investing, with investors closing over 200 venture deals estimated at $1.09 billion, compared to $699 million invested across 132 deals in early-stage companies in 2010.
The expectations from 2012 are quite promising, with the common consensus being that fund corpus and deal sizes are, both, expected to grow in the current year. The education sector has been one of the early gainers with Omidyar Network investing an undisclosed amount in education resources company EnglishHelper on March 22. The philanthropic investment firm, which was set up by e-Bay founder Pierre Omidyar and his spouse, also announced a three-year $950,000 grant to Bangalore-based public charitable trust, Akshara Foundation.
Other recent deals include Sequoia Capital investing $7.5 million in Bangalore-based Edusys Services, and Mumbai Angels investing 5 crore in eDreams Software Innovation. The microfinance sector, too, has seen investment play by the risk capital industry, with Ujjivan raising $25 million earlier in January. SKS Microfinance, the only listed microfinance company in India, also completed two rated pool assignment transactions worth 221 crore and two assignment transactions worth 100 crore from two PSU and an equal number of private banks totaling 321 crore.