Investment firms Sequoia Capital and US-based Norwest Venture Partners have led a round of Series C funding in Chennai-based lending company Five Star Business Finance, the companies said in a joint statement on Thursday.
Five Star Business Finance is currently a loan provider focused in South India.
Existing investors Matrix Partners India and Morgan Stanley Private Equity Asia also participated in the Rs 333 crore funding round.
“As their first investors, we’ve been privileged to partner with Mr Lakshmipathy on his journey of building a long standing financial institution. Their single focus on the small borrower sets them apart and they’ve strived continuously to set the standard for growth, profitability and governance in this space” Vikram Vaidyanathan, Managing Director of Matrix India said.
Morgan Stanley invested Rs 61 crore in this round, and also cut down its stake to about 23 percent from 35 percent.
Sequoia Capital and Norwest acquired 10 percent stake in the company for a Rs 135 crore investment by each company.
Five Star provides small-ticket loans for business operations as well as home loans to individuals. It has over 100 branches in tier 2 cities across Andhra Pradesh, Telangana, and Karnataka.
The company works in partnership with banks and financial institutions such as the State Bank of India, and Bank of Baroda.
The company plans to use the funds to explore new markets in central India and also to improve the current loan book, which stood at Rs 500 crore at the end of FY17.
The company is targeting to reach a loan book size of Rs 1,000 crore by the end of FY18, the statement stated.
The average loan-size disbursed by Five Star for businesses is Rs 3-4 lakh, with tenure of about five years, while the home loans have tenure of 7 years on an average, on ticket size of around Rs 7 lakh.
“Over the years, we have developed an expertise in assessing the cash flow of our clients and in underwriting their credit, while keeping the asset quality intact. Norwest and Sequoia along with our existing investors – Morgan Stanley and Matrix Partners add tremendous strength to our balance sheet and growth plans, as we aim to emerge as a leading player in the small business and small housing loans segment,” D Lakshmipathy, Chairman and Managing Director of Five Star said.
Five Star had raised Rs 114 crore in June last year from Morgan Stanley Private Equity Asia.
In March 2014, Matrix Partners India had invested an undisclosed amount in the company for a minority stake which it followed up with another round in 2015.