Matrix Partners India has led the first institutional round of funding in Five Star Business Credits (Five Star), a Chennai-based small business finance company that provides secured loans to micro & small enterprise customers (MSME). The quantum of funding stands undisclosed.
Five Star with its proprietary secured lending model has catered to more than 5,000 MSME customers over the last five years. It also provides loans for home improvement to MSME customers.
“MSME lending is a significantly underserved market in India not addressed by formal financial channels. We have built a unique credit assessment model for deserving customers that run small but healthy businesses. All our loans are collateral backed. This round of funding should help us further expand our branch footprint and enhance our funding base for long-term expansion,” said D Lakshmipathy, managing director, Five Star.
Five Star caters to customers such as small shop owners (provision stores, small restaurants, textile stores, bakery outlets, medical stores, etc), small & medium machine shop operators, self employed people, etc. It is present across 30 branches in Tamil Nadu and plans to further expand its footprint across different states in India.
“Five Star has a highly differentiated, secured and sustainable lending model to address the large, underserved MSME financing opportunity. We share Lakshmipathy’s vision and passion for this sector and look forward to being his partners in this journey. Financial services is an important focus area for the firm,” said Rishi Navani, managing director, Matrix India.
Matrix Partners, which had previously raised $300 million in its maiden fund, added its second India-focused fund worth $330 million in late 2011. It invests in healthcare, consumer, education, financial service, mobile space, etc.
In the financial services space it had previously invested in microfinance firm Bhartiya Samruddhi Finance besides gold loan company Muthoot Finance. This would be its first new bet in the finance sector after almost three years.
This is also its first new investment in India this year. Most recently it had put in more money in Mswipe and in December backed Chennai-based pathology chain TechMed.
(Edited by Joby Puthuparampil Johnson)