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Global PE players and VCs are now chasing MFIs to take a stake if the industry trends are any indication to go by.

Microfinance sector focused Lok Capital LLC has invested Rs 4 crores in Jagannatha Financial Service Ltd (JFSL). JFSL is a Bhubaneshwar, Orissa based MFI and is part of the KAS group of companies. The investment will be used by JFSL to expand its borrower base, implement a new technology platform and provide additional range of products for the existing clients.

JFSL was launched as a non-banking financial company in 2006 by S. Kathiresan, promoter of the KAS group. He has also launched KAS Foundation in 2003 and Kathir Foundation in 2004 with an aim "to enable the low income community to convert itself into a progressive, education and economically empowered society".

JFSL mainly provides credit services to groups of rural and semi-urban women and has disbursed Rs 70 crore in microfinance loans. It serves 80,000 borrowers and has operations in Orissa, Maharashtra and TamilNadu.

"We believe that JFSL is now in a good position to leverage its existing branch network and exponentially increase its borrower base by providing a range of microfinance products tailored for specific demographies.  Lok is looking forward to support JFSL in expanding its current network to provide a host of financial services to the largely underserved population of Northern India," said Venky Natarajan, Director of Delhi-based Lok Advisory Services. 

Investments In MFI Sector: Up and Running

While private equity investments in general seem to be drying out, there seems to be rise in investments in MFI sector. The recent past has seen several big ticket deals in the microfinance sector in India. Apart from funds focused on MFI sector, this space has also attracted investments from a hedge fund.  On November 10,  SKS Microfinance raised Rs 366 crore or $75 million from private equity investors in the largest microfinance deal in the world. The investment was led by India focused hedge fund Sandstone Capital. Also, last week Bangalore-based Ujjivan Financial Services, the  microfinance institution focusing on the urban and semi-urban poor, announced its fund raising of Rs 94 crore from Sequoia Capital, Lok Capital, Unitus Fund and others.

There have also been several smaller deals in this sector in the past few months. In October, Swadhaar FinServe raised $3 million from Michael & Susan Dell Foundation, ACCION and Unitus Equity Fund. In the same month, Chennai-based Madura Micro Finance raised Rs 22 crore investment from Unitus Equity Fund. In August, Michael & Susan Dell Foundation (MSDF) and Lok Capital LLC invested $1.5 million in Arohan Finnacial Services Ltd, a Kolkata-based microfinance institution (MFI).