MICROCAPITAL BRIEF: Lok Capital Sextuples Investment With Partial Exit from Indian “Socio-commercial” Outsourcing Firm RuralShores

Lok Capital (Lok), a Mauritius-based venture fund focused on the microfinance and social business sectors in India, reportedly has sold part of its equity stake in RuralShores Business Services, an India-based company offering business process outsourcing to public and private clients in the microfinance, banking, insurance, telecom and information technology sectors. The holding, which is of undisclosed size, was acquired by Lok in 2009 through the Lok Capital Fund I, a USD 22 million microfinance investment vehicle, for an undisclosed price. Following the sale, Lok retains an undisclosed share of RuralShores owing to a follow-on equity investment of USD 3 million made in 2011 through the Lok Capital Fund II, an investment vehicle targeting microfinance institutions and social enterprises in India.

While the identity of the buyer and the terms of the sale were not disclosed, “The exit is highly profitable…generating six times the initial investment (in rupee terms)” according to a statement attributed to an unidentified representative of Lok.

As of 2014, RuralShores operates 17 “delivery centers” in 10 states in India and employs approximately 2,500 employees. The mission of the company is to “assimilate rural youth into the knowledge economy through sustainable process outsourcing.” Lok manages approximately USD 87 million of assets through its two investment funds.

By A’kos Szebeni, Research Associate

About RuralShores Business Services

Founded in 2008, RuralShores Business Services is an India-based company offering business process outsourcing to public and private clients in the microfinance, banking, insurance, telecom and information technology sectors. The objective of the organization is to “Establish one RuralShores centre in each of the 500 rural districts of the country thereby providing sustainable employment to over 100,000 rural youths by 2020.” As of 2014, RuralShores operates 17 “delivery centers” in 10 states in India and employs approximately 2,500 employees. In 2013, the company reported annual revenue of INR 315 million (USD 5.1 million). Shareholders of RuralShores include India-based Housing Development Finance Corporation, which holds a 26-percent stake in the firm, and Lok Capital, a Mauritius-based venture fund that holds an undisclosed stake.

About Lok Capital

The Lok Capital Initiative was founded in 2000 with support from the US-based nonprofit Rockefeller Foundation. Its goal is to “…promote inclusive growth by supporting the development of social enterprises to deliver basic services to serve the BoP [base of the pyramid] segment in a scalable, affordable and commercially viable manner.” The initiative is comprised of Lok Capital, a Mauritius-based venture capital fund that places equity and equity-linked investments in microfinance institutions (MFIs) and social enterprises in the education, healthcare and “livelihoods” sectors; and the Lok Foundation, a nonprofit entity that provides “specialized funding and long-term technical assistance for financial and social inclusion.” Lok Capital makes its investments through two funds, Lok Capital I and II. Lok Capital I was launched in 2006 with USD 22 million in investments from Accion, The Commonwealth Development Corporation (CDC), Développement international Desjardins, Netherlands Development Finance Company (also known by its Dutch acronym FMO), International Finance Corporation (IFC), Kreditanstalt für Wiederaufbau (KfW) and responsAbility Social Investments. The fund’s investments generally range in size from USD 500,000 to USD 3 million. Lok Capital II was closed in 2012 with USD 65 million. Its investors included previous LOK investors IFC, CDC, KfW, FMO and responsAbility along with new investors Proparco and ASN Novib.

Sources and Additional Resources

LiveMint, “Lok Capital makes partial exit from RuralShores Business,” http://www.livemint.com/Companies/pFzLQsNdoRS15v1cQENEFK/Lok-Capital-makes-partial-exit-from-RuralShores-Business.html

MicroCapital, April 12, 2013, “Indian Microfinance Institution Satin Creditcare Sells 20% Equity Stake for $8m from Danish Microfinance Partners, MicroVest II, ShoreCap II; Lok Capital Exits,” https://www.microcapital.org/microcapital-brief-indian-microfinance-institution-satin-creditcare-sells-20-equity-stake-for-8m-from-danish-microfinance-partners-microvest-ii-shorecap-ii-lok-capital-exits/

MicroCapital, September 6, 2012, “Bellwether Microfinance Fund, Michael & Susan Dell Foundation Sell Shares in Ujjivan of India to Lok Capital of Mauritius, Undisclosed Social Investor,” https://www.microcapital.org/microcapital-brief-bellwether-microfinance-fund-michael-susan-dell-foundation-sell-shares-in-ujjivan-of-india-to-lok-capital-of-mauritius-undisclosed-social-investor/

MicroCapital, May 7, 2012, “Lok Capital to Exit Indian Microfinance Institution Janalakshmi,” https://www.microcapital.org/microcapital-brief-lok-capital-to-exit-indian-microfinance-institution-janalakshmi/

MicroCapital, February 5, 2010, “Lok Capital Takes Equity Stake in RuralShores, Potential Back Office Provider to Microfinance Institutions,” https://www.microcapital.org/microcapital-brief-lok-capital-takes-equity-stake-in-ruralshores-agent-to-microfinance-institutions/

MicroCapital Universe Profile: RuralShores Business Services, https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=RuralShores+Business+Services

MicroCapital Universe Profile: Lok Capital,
https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Lok+Capital+LLC

Do you know that MicroCapital publishes the MicroCapital Monitor newspaper each month? Find out more at https://www.microcapital.org/products-page/

Similar Posts: