Sequoia leads $234m round of Indian lending firm for small businesses

Non-banking finance company Five Star Business Finance announced that it has raised US$234 million in a new financing round led by Sequoia Capital India.

Photo credit: Five Star Business Finance

Existing investor Norwest Venture Partners also participated in the funding round, along with KKR and TVS Capital.

Five Star is valued at US$1.4 billion after the transaction. The investment will be made through a combination of primary infusion in the company and secondary shares sold by existing investor Morgan Stanley Private Equity.

Funds raised from the round will be used to expand Five Star’s lending business and to provide financing solutions to India’s small businesses.

The startup offers collateralized loans through an assessment of a borrower’s business and household cash flows, and calculates the loan amount. As of December 31 2020, Five Star’s assets under management stood at 4,030 crore rupees (US$555.3 million) and its gross non-performing assets was pegged at 1.29%.

It aims to fund small businesses via “grassroot efforts without compromising on the pillars of asset quality and profitability that are needed to build a sustainable institution of scale,” said D Lakshmipathy, the company’s chairman and managing director.

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Recently, Sequoia Capital India reportedly closed a US$195 million second seed fund as part of its Surge program, which backs seed- and early-stage startups through funding and mentorship.