Mumbai: Impact investor Lok Capital is looking to invest at least 15-20% of the corpus of its third fund—Lok Fund III—in technology companies working in the area of financial inclusion, a senior executive said.
This is the first time Lok Capital, which invests in businesses that generate both financial returns and social or environmental good, is considering tech companies. It has already invested in two fintech companies—Mintifi and Affordplan—from the third fund.
“In the third fund we will end up with a portfolio of about 12-13 companies and one-third could be in technology ventures. In terms of quantum of capital, it will be around 15-20% of the fund," said Vishal Mehta, co-founder and partner at Lok Capital.
Lok Capital has raised $90 million for its third fund. The previous two funds of the impact investor were focused on investing in traditional brick and mortar businesses.
Mintifi enables financing to small and medium businesses by leveraging technology to aggregate and utilize operational data as a key part of the credit underwriting process. Affordplan provides tailored financial planning solutions that allow the people to plan, save and pay for their medical expenses beforehand.
Lok Capital’s interest is focused largely on fintech companies working in the financial inclusion space.
“Financial services is the core focus area where we have an explicit mandate and understanding and also it’s the reflection of the pipeline as well," said Mehta. Apart from financial services, Lok Capital also invests in healthcare and agriculture sectors.
According to Mehta, while Lok Capital is scouting for and investing in fintech companies, the investment thesis still remains focused on the underlying business i.e. financial services.
“We will only look at those fintech deals where the promoters are coming with very deep and clear understanding of risk and underwriting. On the side of it, if they are building intelligent acquisition platform or if they are doing something that will reduce turnaround time and bring more operational efficiency, that is great. But the core cannot be anything else," said Mehta.
Mehta added that Lok Capital being a financial inclusion fund and not just any other financial services fund, it has a clear preference for lending models that support microfinance and MSME lending rather than consumer lending. Its foray into investing in technology backed businesses has meant that the impact investor has had to tweak its investment thesis and its style of working.
“We need to look at some of these ventures from a different lens than brick and mortar. So there is adjustment that is required internally," he said.
Lok Capital has already committed around 65% of its current fund across 8-9 companies and expects to exhaust the entire fund before end of the year.