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Lok Capital, a venture capital fund that invests in social enterprises, has said that it has closed its second fund of $65 million.
Some of the existing investors in Lok Capital's fund — IFC, CDC, KfW and FMO — have subscribed to the second fund, according to a press release from Lok Capital.
The first fund of $22 million has been fully deployed. The investments were in the micro-finance industry — Ujjivan, Janalakshmi, Basix, being some of the companies in which Lok Capital has invested in.
Mr Venky Natarajan, Managing Partner, Lok Advisory Services, told Business Line over telephone that the final closing of the second fund was delayed by a few months because of the global economic situation. The first closing of the second fund was in August 2010 and the second closing in February 2011. Ideally, the final closing should have happened by August 2011.
Investment & returns
Lok Capital, he said, looked for both financial and social returns from the money it invested in.
The financial returns would typically be much lower than what private equity funds looked for. The social returns would be in the form of more affordable products or services to the target population.
Most of the companies that Lok Capital invested in would have their head offices in the metros, but their operations would be in smaller towns. In the first fund, Lok Capital picked up eight per cent to 10 per cent stake in the companies it invested in.
In the second fund, which it hoped to fully invest over the next four years, Lok would look to pick up a 20-30 per cent stake. The typical investment horizon would be four to six years.
Mr Natarajan said there was good appetite for venture capital funds from social enterprises, as banks normally would not lend to these firms.
Future investments would focus on enterprises that looked at broader financial inclusion — full service financial institutions, micro-credit, mobile payments, remittances and small business lending. Lok Fund II would also target businesses offering low cost healthcare (at primary and tertiary levels), education (remedial education and content) and vocational training.
Lok Fund II would invest $2-4 million in the enterprises. In September last, it invested $3 million in the Bangalore-based BPO Rural Shores from the second fund.
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