TPG, the global alternative asset firm, on Monday 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 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 organized financial sector. Five Star’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. 1220 crores in assets across more than 15’0 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.
“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.
“Five Star is bridging the funding gap for small business owners, providing them with tailored, risk-conscious financial solutions. We are impressed by the company’s differentiated business model and skilled team, and are pleased to partner with them in their next stage of growth,” said Gaurav Trehan, Partner at TPG Capital Asia.
