Lok Capital may exit Janalakshmi Financial Services

Lok Capital is preparing to exit from its investment Janalakshmi Financial Services, an urban microfinance company.

"We had picked up a minority stake in Janalakshmi in a start-up deal and are now looking to exit as the company has achieved the desired scale," said Vishal Mehta, Co-founder & Partner at Lok Capital.

The Bangalore-based company is raising over 50 crore from private equity investors, providing an exit opportunity for early backers such as Lok Capital, the Michael and Susan Dell Foundation and Bellwether Microfinance Fund who funded the company when it was set up in 2007.

Lok Capital invested 1.6 crore in March 2007 as series A investor. It sold 25% of its holding in June 2011 for 2.77 crore, with a return of 59%.

"We are in talks to raise capital to expand our operation in other cities and it could come from either our existing investors or new ones," said Janalakshmi founder, Ramesh Ramanathan.

So far, Janalakshmi has raised three rounds of investments. Treeline Asia Master Fund, one of the largest hedge funds in Asia, invested $10 million or 50 crore in 2010 while Citi Venture Capital International invested 65 crore in 2011.

Investor interest is beginning to pick up in the microfinance sector, which was has been mired in controversy since 2010 following a wave of defaults in Andhra Pradesh, the largest microfinance market in the country.

The prospect of a profitable exit is set to raise investor attention in the sector. Some of the recent investments in the sector include a 120-crore fund infusion in Bangalore-based MFI Ujjivan Financial Services.