Bangalore: Bangalore-based Elevar Equity Advisors Pvt. Ltdhas raised its second fund of $70 million (Rs320 crore) to invest in growth-stage companies that cater to the poor in India, Mexico, the Philippines and Peru, said co-founder and managing director Sandeep Farias.
With the new fund the investment firm, which has so far focused on microfinance institutions, or MFIs, would look at expanding its horizon to education, healthcare, home improvement and financial services firms.
About 60-70% of this fund would be invested in India. The investments would be of $1-5 million for minority stakes in firms “providing high-volume, low-cost services to the poor and their communities,” Farias said by phone.
The anchors of the new fund are Legatum Group and Omidyar Network, which has quadrupled its commitment to Elevar in this fund from the earlier fund. Elevar’s first fund, Unitus Equity Fund, had a corpus of $24 million and was focused on MFIs.
Investors say Elevar’s plan to expand into companies providing services to the poor could have been prompted by the gradually declining early-stage investment opportunities in MFIs.
“It’s not sensible for a fund to say that they will only do MFI deals. With their MFI exposure (from the first fund), Elevar has realized that there are other needs of the poor which also make good business sense,” said Sumir Chadha, managing director, Sequoia Capital India, which has invested in SKS Microfinance Ltdand Equitas Micro Finance India Pvt. Ltd.
One of the biggest challenges in such a move for an investor is finding a firm that can scale up and make money while still offering products or services at low prices, say investors.
“Twenty times more hard work is needed in these investments compared to MFIs,” said Vineet Rai, chief executive, Aavishkaar, a social investor.