Bangalore MFI Janalakshmi eyes Rs 200cr PE

Mon Nov 29, 2010 6:36pm IST

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Janalakshmi Financial Services, a Bangalore based microfinance institution (MFI), is close to raising up to Rs 200 crore in private equity funding in what could be one of the largest fund-raising in the sector in recent times, sources familiar with the development said. Janalakshmi, founded by former Citigroup banker Ramesh Ramanathan, focuses exclusively on extending micro loans in the urban areas.

Though it is learnt that a development finance institution may be leading the investment, it could not independently confirmed. When contacted by VCCircle, Ramanathan declined to offer any comments.

Microfinance industry has been a guzzler of private equity funds primarily to fuel its growth ambitions. Backed by high investor interest, the sector has, over the years, seen the emergence of at least a dozen sizeable players and one blockbuster listing debut (SKS Microfinance). But recent events such as Andhra Pradesh ordinance that has restricted collections in the state and questions raised on high interest rates and profit-making by firms in a social business are threatening the impact the business model, profitability and sustainability in the state.

An industry observer says, Janalakshmi does not operate in Andhra Pradesh, so, to that extent, it may be insulated from the events in the state. But, things can change in other geographies also, he added.

The urban-centric MFI has raised two rounds of funding before this. It raised $10 million in a round led by Treeline Asia Master Fund (Singapore) in March this year. Its investors also include Narayan Ramachandran, the former country head of Morgan Stanley India. Other existing investors in Janalakshmi include Bellwether Microfinance Fund, Lok Capital and the Michael and Susan Dell Foundation.

Janalakshmi Financial Services is a for-profit NBFC urban MFI with the promoter stake held in the not-for-profit entity Janalakshmi Social Services. This is the only MFI in India structured to keep the social spirit intact, according to information on its website. Ramanathan also forayed into low-cost housing space with Janaadhar Constructions Pvt. Ltd, floated by Janalakshmi Social Services to provide homes for the informal sector.

Large private equity investments in MFIs have been relatively few in last few months as several institutions were evaluating an IPO after the SKS Microfinance listing. But the recent ordinance by Andhra Pradesh government has played spoilsport to such plans and they may now be looking at private capital to fund their growth.

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