MSPEA leads India microfinance investment

Morgan Stanley PE, Tata Capital and Citi Venture Capital joined in the series D financing round for Janalakshmi to invest a total of $53 million.

Morgan Stanley Private Equity Asia, Tata Capital and Citi Venture Capital have invested in microfinance business Janalakshmi, helping it raise INR 3.25 billion (€40 million; $53 million) in a series D financing round, according to a joint statement. Other institutions in the round included QRG Enterprises and the India Financial Inclusion Fund.

The deal marks the largest transaction in India’s microfinance sector since 2010, according to the firms. Janalakshmi, headquartered in Bangalore, focuses on urban Indian microfinance and financial inclusion. It is the only microfinance institution in India whose entire promoter stake is held in a not-for-profit company, the Jana Urban Foundation. 

The transaction also marks an exit for private equity firm Lok Capital and the Michael & Susan Dell Foundation, both of which were early stage Series A investors. Citi Venture is also an existing investor in the business, having first invested in 2011. 

We believe that investment for growth and financial inclusion are closely interlinked and these are both key priorities for the country today. We are therefore delighted to partner with Janalakshmi

Akhil Awasthi, managing partner of Tata Capital Growth Fund

“Janalakshmi has emerged as a thought leader in the urban microfinance space, backed by a passionate and ambitious founder, a professional management team and excellent systems and processes,” Aluri Rao, managing director of MSPEA India, said in a statement.

Akhil Awasthi, managing partner of Tata Capital Growth Fund, added, “We believe that investment for growth and financial inclusion are closely interlinked and these are both key priorities for the country today. We are therefore delighted to partner with Janalakshmi, a pre-eminent institution engaged in economic welfare of the lower strata of the society.”

MSPEA, the Asian private equity arm of Morgan Stanley bank, has been actively investing in Asia as it reportedly gears up to close its $1.5 billion Fund III for the region. The firm declined to comment on fundraising matters. 

Recent MSPEA deals include an investment in Korean restaurant franchiser Nolboo in November 2011 worth KRW 120 billion and a March 2012 acquisition of China-based Tianhe Chemicals worth $300 million – its largest investment ever, according to the firm. MSPEA is currently investing from its $515 million second fund, according to PEI’s Research & Analytics division.