American private equity firm TPG has made a follow-on investment worth $50 million (about Rs 344.7 crore at current exchange rate) in Five-Star Business Finance Ltd, which makes loans primarily to small and medium-sized enterprises.
The investment comes within a year of the non-banking financial company raising $100 million in July last year in a funding led by TPG and joined by existing investors Norwest Venture Partners, a fund managed by Morgan Stanley, and Sequoia Capital.
With this round, Five-Star said it is close to attaining a valuation of at least $1 billion. The Hindu BusinessLine said that the lender is valued at $950 million.
TPG's funding takes the company's net worth to Rs 1,735 crore, including the first quarter’s profit after tax, said Rangarajan Krishnan, chief executive of Five-Star.
Five-Star started operations in 1984, with a focus on consumer loans and vehicle finance. In 2005, it shifted focus to micro, small and medium-sized enterprises in urban and semi-urban markets.
Five-Star has about 200 branches across eight states and Union Territories of India. Its current loan portfolio stands at about Rs 2,500 crore, with gross non-performing assets standing at one per cent of the loans.
The company aims to have a loan portfolio of about Rs 4,000 crore by the end of this financial year.
Five-Star also raised $100 million debt investment, led by US fund manager Franklin Templeton.
In August 2017, the company raised primary capital of Rs 333 crore from new and existing investors. New investors Sequoia Capital and Norwest Venture Partners had committed about Rs 135 crore each. Existing investors Morgan Stanley Private Equity Asia and Matrix Partners invested Rs 61 crore and Rs 2 crore, respectively. The Rs 333 crore deal involved a primary component worth Rs 318 crore and a secondary component of Rs 15 crore that gave a partial exit to promoters.
Five-Star had raised its first institutional round of funding in 2014 from Matrix Partners. The private equity firm invested again the following year. In 2016, the lender mobilised Rs 114 crore ($17 million then) from Morgan Stanley Private Equity Asia, according to VCCEdge, the data research arm of Mosaic Digital.