TPG leads $100 mn investment in Five Star Business Finance  

Five Star Business Finance, a non-bank lender focused on South India, raised $100 million in an investment round led by global private equity TPG, in participation with existing investors Norwest Venture Partners, an investment fund managed by Morgan Stanley, and Sequoia Capital.

The company’s first backer, Matrix Partners, continues to stay invested in the company, Five Star said in a statement on Tuesday. Additional terms of the transaction were not disclosed.

Five Star is a non-banking financial company (NBFC) which provides loans to nearly 40,000 customers. The companyfocusses on lending to the under-banked population, who typically lack the financial records necessary to participate in theorganised 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. It provides them with tailored, risk-conscious financial solutions.

The company manages nearly Rs 1,220 crore in assets across more than 150 branches in six states.

“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 a statement.

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 dynamic 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.

“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, which was founded in 1984, has over the years evolved into a specialist business finance company focusing on fully secured small business loans. As of June 30, Five Star’s overall employee base stood at 1,450.

TPG, on the other hand, is a global alternative asset firm, which was founded in 1992. It has nearly $84 billion of assets under management. Its investment platforms are across a wide range of asset classes, including private equity, growth venture, real estate, credit, public equity and infrastructure. Last month, Bigtree Entertainment, which owns online entertainment ticketing platform BookMyShow, had raised $100 million in its series D funding from TPG Growth and other investors.