Microfinance firm Janalakshmi raises $53M in Series D led by Morgan Stanley PE

Janalakshmi Financial Services Pvt Ltd, a microfinance institution based in Bangalore, has closed its Series D funding round worth Rs 350 crore ($57 million) from a consortium of new and existing investors. This is one of the largest private investment transactions in the Indian microfinance industry since the regulatory crisis in Andhra Pradesh in 2010. In 2009, three venture capital investors invested $75 million in SKS Microfinance Ltd.

Of the total, Rs 325 crore represents primary equity funding while Rs 25 crore is the value of secondary component through which two existing investors Lok Capital and Michael & Susan Dell Foundation have exited. Both were early stage investors who came in at the Series A round.

The new investors who participated in this round include Morgan Stanley Private Equity Asia (MSPEA) who led the transaction and Tata Capital Growth Fund and QRG Enterprises, the promoter holding company of Havells India.

The existing investors—Citi Venture Capital (CVCI), India Financial Inclusion Fund and Vallabh Bhanshali, one of the founders of ENAM Securities, also participated in the current round.

Janalakshmi, a for-profit MFI, has assets of more than Rs 1,200 crore, with the entire promoter stake being held in Jana Urban Foundation, a not-for-profit outfit. The structure ensures that no financial benefit arising from the performance of Janalakshmi accrues to the promoter personally, it added. The MFI is among the 26 entities that have applied for new banking licence.

Edelweiss Financial Services Ltd and Unitus Capital jointly advised the company on this transaction.

Ramesh Ramanathan promoted Janalakshmi is among the MFIs that focus on providing microfinance to borrowers in urban areas.

The MFI has been growing its loan book and disbursement aggressively over the last financial year. It increased its gross loan portfolio by 173 per cent to Rs 953 crore as on March 31, 2013; it disbursed Rs 1,126 crore in the same period.

It operates in 11 states, with Karnataka and Tamil Nadu together accounting for around 53 per cent of its total loans outstanding as on March 31, 2013 compared with 65 per cent as on March 31, 2012.

Janalakshmi reported a net profit of Rs18 crore on a total income Rs 170 crore for 2012-13, against a net profit of Rs 1.2 crore on a total income of Rs 71 crore for 2011-12.

VS Radhakrishnan, MD and CEO of Janalakshmi, said, “This investment will help us continue in the path of growth, as we continue to focus on building customer relationships with financial products and new technology like Aadhar-based front end terminals”

Aluri Rao, managing director of Morgan Stanley Private Equity Asia, in India, said, “Janalakshmi has emerged as a thought leader in the urban microfinance space. It is well-positioned to become a pioneer in providing inclusive financial services to the urban-underserved”.

Gautam Benjamin, senior vice president at Edelweiss Financial Services, said, “The fact that several investors have participated in this round is indicative of the good work that the company has done and its prospects going forward”

Eric Savage, co-founder and president of Unitus Capital, said, “With this transaction, Janalakshmi has established itself as a leader in providing inclusive financial services.”

(Edited by Joby Puthuparampil Johnson)

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