Janalakshmi Financial set for a record PE fund raise

May scale the target to as much as Rs 600 cr

Janalakshmi Financial Services, an urban micro-finance institution (MFI) started by well-known social entrepreneur Ramesh Ramanathan, is understood to be setting the stage for a record fund raise in the micro-finance space. According to information available, the funding may touch Rs 600 crore.

Investment bankers who are in the know about the Bangalore-based MFI's plans indicated that this record fund raise may be in phases and the first infusion will be in the Rs 350-crore range, besting its earlier fund raise last year. In August 2013, Janalakshmi had raised Rs 325 crore in Series D funding, led by Morgan Stanley Private Equity Asia. Tata Capital Growth Fund and QRG Enterprises, the holding company of Havells India, also participated. Citi Venture Capital, India Financial Inclusion Fund and Vallabh Bhansali, co-founder and chairman of Enam Financial Consultants, also participated in the round. Janalakshmi has raised close to Rs 600 crore so far in multiple rounds, including the last round. The promoters currently own a little under 22 per cent.

Janalakshmi's earlier fund raise of Rs 325 crore has been the benchmark for the MFI space in recent years and, according to market information, Ujjivan Financial Services, another MFI based in Bangalore, is planning a Rs 350-crore fund raise, which should be executed in 2014. If Janalakshmi scales up the Rs 600 crore fund raise, it will mark a resurgence of the MFI sector in India, after phases of turmoil in the sector. When contacted, Ramanathan said he has no comments to offer on the fresh fund raise.

This move by Janalakshmi comes a couple of months after International Finance Corporation invested Rs 120 crore through a debt instrument to expand the lending operations of the MFI. According to recent reports, the management of the company had indicated that it would be required to raise as much as Rs 1,500 crore to Rs 2,000 crore through multiple instruments to propel their operations and is targeting a book size of Rs 10,000 crore over the next three-year period. Janalakshmi Financial Services is a for-profit MFI, with assets of over Rs 2,000 crore with the entire promoter stake held in a not-for-profit, Jana Urban Foundation.

In FY14, Janalakshmi reported a three-fold surge in net profit to Rs 50 crore on revenues of Rs 408 crore, which grew by as much as 2.5 times.

FINANCING URBAN POOR

• Rs 600 crore Amount Janalakshmi may raise as part of PE fund raising
• Rs 350 crore The amount likely to be raised in the first phase
• Rs 325 crore The amount it earlier raised in August 2013
• Morgan Stanley, Tata Capital and QRG Enterprises led the last round of funding