 "Lok Capital announces first close of fund III at $40.5 mn")
Lok Capital, India-focussed impact investment fund, today announced the first close of Lok Fund III at $ 40.5mn.
This, along with Lok Capital’s Fund I and Fund II will bring the total capital under-management to over $125 mn. Existing LPs - CDC Group Plc (the Development Finance Institution of the UK), Nederlandse Financierings-Maatschappij voor Ontwikkelingslanden N.V.’s (FMO)and Société de Promotion et de Participation pour la Coopération Economique (Proparco) have participated in this funding round, while TIAA Global Asset Management has come on board providing a new source of capital for Fund III which has a total target corpus of around $100 mn and is expected to close in the next 12-18 months.
The fund will be deployed in the next five years and will focus on growth stage investments in financial services, healthcare, agriculture and livelihood. While the average tranche per investment will range between $2-10mn, Lok Capital will continue to collaborate with LPs for joint investment in larger deals, as in Fund II.
Venky Natarajan, Managing Partner, Lok Capital said: “Aided with the government initiatives from the last few years along with very progressive regulatory environment, the climate is ripe in India for deepening financial inclusion through both traditional business models as well as through fin-tech models. By committing to the 3rd fund, our investors have placed trust in the founding team, which has stayed together for the last 10 years and on our ability to stay disciplined while investing and managing investments.”
The year 2015 saw four of Lok’s portfolio companies get small finance bank (SFB) licences; these include Equitas Holdings, Suryoday Microfinance, Ujjivan Financial Services and Utkarsh Micro Finance. Lok Capital has the unique distinction of being the only India focused impact fund with all existing retail microfinance institutions in the portfolio receiving the coveted license.
Fund III will also focus on other emerging models in financial services such as SME finance, affordable housing finance and digital/tech-enabled financing.
In healthcare, the areas of interest for Lok Capital include delivery of affordable healthcare, devices and diagnostics in under-served geographies. In addition to these, the agriculture sector has opened up significant opportunities for impact investments, including dairy, supply chain management and integrated farm-to-fork models. In January 2016, Lok invested in Pune-based Siddhivinayak (SV) Agri Processing, an end-to-end potato supply chain management company, marking its first investment in the agriculture sector. Fund III is expected to back more enterprises in the agri and dairy space.
Since its inception in 2002, Lok Capital has built a track record as an impact investor. It has fully returned the committed capital of $22 mn from Fund I with a $ IRR of 15%. Fund II is presently tracking gross returns of 28% in USD terms, with portfolio companies Equitas and Ujjivan going public. Some of its good exits include Satin Creditcare, Janalakshmi Microfinance and RuralShores.
Rekha Unnithan, Impact Investing Portfolio Manager at TIAA Global Asset Management, remarked that there are many opportunities for achieving the double bottom line of financial and social returns in India, “We seek to generate financial return along with measurable social and environmental outcomes by focusing on sustainable, commercial enterprises that provide basic products and services to low-income and underserved populations globally. This strategy aligns very well with our portfolio objectives and complements our decades-long commitment to responsible investment.”
