MSPEA backs India NBFC Five Star
Morgan Stanley Private Equity Asia (MSPEA) has invested INR1.14 billion ($16.9 million) in Five Star Business Finance, an India-based non-banking finance company (NBFC) that specializes in small ticket business and housing loans.
Five Star has 67 branches across the southern states of Tamil Nadu, Andhra Pradesh and Karnataka, serving more than 9,000 customers. Its loan book grew 50% year-on-year during the 12 months ended March 2016, reaching approximately INR2 billion. Net profit for the year came to INR137 million.
The company first received institutional funding from Matrix Partners India, which provided two rounds in 2014 and 2015. It remains a minority shareholder, alongside MSPEA. At the time of the first investment, Five Star had 30 branches and had issued loans to 5,000 micro, small and medium-sized enterprise (MSME) customers over the preceding five years.
Expansion efforts over the last 12 months were further supported by an INR300 million investment from Netherlands-based development finance institution FMO in December 2015, in the form of non-convertible debentures (NCDs). Since then, Five Star has also received a housing finance license from the National Housing Bank, which will help the company ramp up operations in housing loans.
"The term 'five star' refers to excellence and we believe that this is what this organization continuously strives to achieve. The financial services industry in India offers tremendous opportunity and this investment marks Morgan Stanley Private Equity Asia's second investment in the space in India," said Arjun Saigal, India co-head at MSPEA, in a statement.
The private equity firm's other investment in India financial services is for-profit microfinance lender Janalakshmi Financial Services. It led a INR3.25 billion Series D round for the company in 2013 and participated in a $150 million investment led by TPG Capital earlier this year. Janalakshmi lends to joint lending groups, MSMEs and individuals with a good credit history.
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