TPG signs pact to invest in South India-based Five Star Business Finance

TPG, the global alternative asset firm, on Tuesday announced that it has signed a definitive agreement to invest in Five Star Business Finance Limited (Five Star) a fast-growing, fully-secured small business financing company focused on South India. 

Existing investors Norwest Venture Partners, an investment fund managed by Morgan Stanley, and Sequoia Capital are investing alongside TPG Capital Asia. The company’s first investor, Matrix Partners, continues to stay invested in the company. Additional terms of the transaction were not disclosed.

Five Star is a non-bank finance company headquartered in Chennai, providing loans to nearly 40,000 customers. The company focuses on lending to the under-banked population, which typically lacks the financial records necessary to participate in the organised financial sector. The company's customers include small business owners such as single shop retailers like vegetable vendors, provision stores, food retailers and self-employed individuals. The company maintains a healthy asset quality, managing approximately Rs 12.2 billion in assets across more than 150 branches.

“Our 30 years of experience as a hands-on partner to our customers has led us to establish a business model that directly addresses the needs and risks unique to their businesses,” said D Lakshmipathy, Chairman and Managing Director, Five Star. “In TPG we’ve found a partner that is fundamentally aligned with our mission to empower India’s under-banked segment. The firm has a long track record of partnering with financial services companies like us that are providing risk-focused, market-specific tools to help businesses grow. TPG is a great addition to our strong roster of investment partners and we look forward to working together to continue to grow the company,” he added 

“For many years, small enterprises across India have struggled to gain access to traditional financial systems due to their inability to meet formal requirements for credit. In South India and across the country, demand for funding continues to significantly outpace supply,” said Puneet Bhatia, Managing Partner at TPG Capital Asia.

The financial services sector is a key focus area for TPG in India and Asia more broadly. For more than 15 years, the firm has been partnering with companies across the region, including BFI Finance, BTPN, Jana Small Finance Bank, Shenzen Development Bank, Shriram City Union Finance, Shriram Transport Finance and Union Bank of Colombo.

TPG is a leading global alternative asset firm founded in 1992 with approximately $84 billion of assets under management and offices in New York, Mumbai, Austin, Beijing, Boston and other cities across the world. TPG’s investment platforms are across a wide range of asset classes, including private equity, growth venture, real estate, credit, public equity and infrastructure.