Ummeed In News

Impact investor Lok Capital scores another profitable exit with housing finance NBFC

Impact investor Lok Capital has booked a profitable exit from a four-year old investment in a non-banking finance company (NBFC) that operates in the affordable housing finance segment.

On Friday, private equity firm CX Partners acquired a substantial part of Lok Capital’s equity stake in Gurugram based Ummeed Housing Finance via secondary transaction worth Rs 81 crore.

According to a person aware of the transaction, the impact investor earned a 36% internal rate of return (IRR) in the secondary stake sale and over 40% IRR cumulatively. Private equity and venture capital firms typically target an IRR of 20-30% in local currency terms in emerging markets.

Email queries to Lok Capital didn’t elicit responses at the time of publishing this article. Ummeed said Lok Capital has made returns well north of industry benchmarks and continues to retain a small stake in the company.

According to VCCEdge, Lok Capital invested a total Rs 41 crore in the company over three tranches, starting from 2016. Early last year, Morgan Stanley Private Equity Asia invested in Ummeed. The deal saw Lok Capital sell equity stake worth about Rs 21 crore via a secondary transaction.

Cumulatively, the impact venture capital firm has realised a little over Rs 100 crore on the Ummeed investment.

Lok Capital is currently investing from its fourth fund, dubbed Lok Capital Growth Fund IV, which was launched in late 2018. In August 2019, Dutch development finance company FMO announced its intent to invest $15 million (Rs 107.4 crore) in the fourth fund.

While announcing the CX Partners investment last week, Ummeed said the robust valuation metrics at which the transaction was concluded, has reaffirmed the company’s ability to navigate the Covid-19 pandemic successfully, driven by a robust underwriting model, a focused collections team and early