Impact investment firm Lok Capital said on Thursday it has raised $40.5 million (Rs 273 crore) to mark the first close of its new fund, Lok Fund III, pushing its total assets under management above $125 million.
The fund received investments from existing investors—or limited partners (LPs)—including CDC Group Plc, FMO and Proparco, the development finance institutions of the UK, the Netherlands and France, respectively. TIAA Global Asset Management came in as a new investor in the fund.
Lok Fund III has a target corpus of around $100 million and is aiming to wrap up the fundraising process in the next 12-18 months.
The fund will be deployed over the next five years and will focus on growth-stage investments in financial services, healthcare, agriculture and livelihood sectors. It will typically invest in the $2-10 million range.
Lok Capital said it will continue to collaborate with LPs for co-investments in larger deals from the third fund, as was the case for Fund II.
Venky Natarajan, managing partner at Lok Capital, said the climate is ripe in India to deepen financial inclusion through both traditional business models as well as through fin-tech models thanks to government initiatives over the past few years and a progressive regulatory environment.
The new fund will also focus on other emerging models in financial services such as SME finance, affordable housing finance and digital/tech-enabled financing. The areas of interest in healthcare include delivery of affordable healthcare, devices and diagnostics in under-served regions.
In the agriculture sector, the fund will focus on dairy, supply chain management and integrated farm-to-fork models.
Lok Capital marked its first investment in the agriculture sector in January when it backed Pune-based Siddhivinayak Agri Processing, a potato supply chain management company. The third fund seeks to back more enterprises in the farm and dairy sectors.
“We seek to generate financial returns 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,” said Rekha Unnithan, impact investing portfolio manager at TIAA Global.
Lok Capital said it has fully returned the committed capital of $22 million from its first fund with an internal rate of return of 15% in dollar terms. The second fund is currently tracking gross returns of 28% in dollar terms, with portfolio companies Equitas and Ujjivan going public.
Some of the firms from which it has harvested its investments include Satin Creditcare, Janalakshmi Microfinance and RuralShores.
Last year, four of Lok Capital’s portfolio companies—Equitas Holdings, Suryoday Microfinance, Ujjivan Financial Services and Utkarsh Micro Finance—were selected by the Reserve Bank of India to start small finance banks, a new category of lenders.
Several other VC funds are in the market to raise capital including Aavishkaar Venture Management, a close peer of Lok Capital in terms of the investment theme. Aavishkaar has just floated a new VC fund.
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