KKR-led consortium invests $234 million in Five-Star Business Finance

MUMBAI: A consortium of leading global and Indian private equity firms invested $234 million (Rs 1,700 crore) in Five-Star Business Finance Limited, a South India-focused lender to small businesses.

The round included investment by existing investors in the company – led by Sequoia Capital India, Norwest Venture Partners as well as new investors, led by KKR and TVS Capital, said a company statement.

The investment values the company at $1.4 billion (Rs 10,300 crore).


The investment will be made through a combination of primary infusion in the company and secondary shares sold by existing investor Morgan Stanley Private Equity.

The company’s other existing investors - Martix Partners and TPG Capital - continue to stay invested.

Five Star plans to use the capital to expand its lending business to provide much-needed financing solutions to more of India’s small businesses, which comprise a large and growing segment of the country’s economy, the statement added.

Five Star has 262 branches spread across eight states of India in the southern and central parts of the country. As of December 31, 2020, the company’s AUM stood at Rs 4030 crore, and GNPA at 1.29 per cet.

“In our mission of ‘Funding the unfunded,’ we have created a niche for ourselves empowering small businesses and the self-employed
across corners of India by providing them with reliable and responsible funding alternatives," said D Lakshmipathy, Chairman and Managing Director of Five Star.

"Led by the vision of Lakshmipathy, Five Star has executed exceptionally towards its goal of funding and empowering micro business entrepreneurs across India in a scalable way," said Niren Shah, Managing Director, Norwest India.

"The company is a true pioneer in the market having supported the growth MSMEs for decades, playing an important role in India’s economy," said Gaurav Trehan, Partner at KKR.

KKR’s investment is part of its Global Impact strategy, and marks KKR Global Impact Fund’s second investment in India, and fifth in the Asia Pacific.

The Global Impact Fund is focused on generating risk-adjusted returns by investing in companies that contribute toward the United Nations Sustainable Development Goals (SDGs).

There are approximately 60 million MSMEs across industries in the market, which employ an aggregate of 125 million people and account for over 30% of India’s GDP.