MUMBAI: Lok Capital, the Rockefeller Foundation-backed impact investor, aims to raise $45 million (about Rs 270 crore) by June as part of the initial close of its third India-focused fund. Lok Fund III, announced a couple of months ago, has a final target corpus of $100 million and expects to raise capital commitments from development financial institutions such as International Finance Corporation (IFC), Proparco and CDC Group
Ahead of fundraising, the Delhibased investor will also exit two more investments from the microfinance sector-focused Lok Fund I portfolio. "The fund made a total of 10 investments and has already exited six. We'll have two more exits by February-end," Lok Capital co-founder and partner Vishal Mehta told ET.
The remaining investments from the $22-million Lok Fund I are Suryoday Micro Finance, Asirvad Microfinance and Ujjivan Financial Services. Last October, gold loans financier Manppuram Finance announced an agreement to acquire Chennai-based Asirvad. The board approvals for the transaction, for Mannapuram buying up to 85% of the company, came through last month. Lok Fund I had invested about $2 million in the company in 2012 for a 24% stake.
The fund has so far exited its investments in microfinance institutions Satin Creditcare, Janalakshmi Finance, Spandana Sphoorty Financial, Arohan Financial Services and Ujjivan Financial Services.
Ujjivan, in which Lok Fund I held a 14% stake, was a partial exit about a year ago. Mehta did not disclose further details on the exit. The MFI portfolio has seen one write-off — Hyderabad-based Basix, one of the casualties of the 2010 microfinance sector crisis.
Earlier this year, Lok Fund I also exited its stake in rural BPO services firm RuralShores, earning a reported profit of six times on its original investment. Lok Capital, however, remains an investor in the company through Lok Fund II.
"Despite the microfinance crisis, we have done reasonably well on Fund I. The IRR (internal rate of return) on the fund is currently at 10% in dollar terms," said Mehta.
The microfinance crisis saw Lok Capital diversify its investment strategy away from the sector into the broader financial inclusion space. Much of its $65-million Lok Fund II has been invested in areas such as healthcare, education and micro-housing finance. The firm enters the market for its third fund when there is renewed overseas interest in impact investing in India.