Lok Capital Fund 1 exits RuralShores with 6x returns

Impact investment fund Lok Capital announced its exit from the investment made in RuralShores, India’s first rural BPO, from its Fund 1 made in 2009. The RuralShores investment has proved successful in terms of financial returns generating six times the initial investment, the Fund announced today. “Lok Capital’s investment in RuralShores and the subsequent exit validates investment in livelihood-focused business models,” the announcement stated.

One of the most active venture capital funds investing in high potential financial inclusion and broader inclusion enterprises like education, healthcare, and livelihoods, Lok Capital serves the lower income and bottom of pyramid (BOP) segment. Lok Capital Fund 1 was set up in 2004. They mainly invested in microfinance companies. Such investments had them working closely with the low income segment, and this experience showed them the need for interventions beyond microcredit. That is how the fund decided to foray into the rural BPO space with RuralShores.

RuralShores highlights

• Entrepreneur Murali Vullaganti started RuralShores in May 2008
• Aim was to bring jobs to villages, prevent urban migration
• Modus operandi was to improve skill sets of rural youth, increase income levels of the target group
• Currently employs over 2500 rural youth in 18 delivery centres across various India
• Achieved revenues of Rs 31.5 crore in FY2013.
• 45% of the RuralShores workforce are women
• Impact: On joining their workforce, an employee’s annual household income increases by 100% and family savings go up by 20%
• Diversified into higher-end BPO services in customer care and payroll management
• 24 clients, including leading telecom and IT companies, as well as the government of India
• Plan is to establish a centre in 500 rural districts of India, provide sustainable employment to over 100,000 rural youth by 2025

In the exit announcement, Venky Natarajan, Managing Partner, Lok Capital, said: “RuralShores brought the right elements to become the anchor investment for Lok’s portfolio outside of microfinance. Right from the beginning, we were convinced about the business model’s effectiveness in generating rural employment. This investment proves that livelihood generation is a sustainable way to create inclusion among the low income group. The model is replicable in various sectors and has the potential to open up endless opportunities to create impact”. Natarajan serves on the board of RuralShores.

Lok Capital is still an investor in RuralShores from its Fund 2 made in 2011.

Rajiv B Lall founded Lok Capital in 2000 with a seed grant from the Rockefeller Foundation. Donald Peck and Vishal Mehta are cofounders. Currently, they manage two funds with a corpus of almost $90 million. Their portfolio includes Ujjivan, Basix, Janalakshmi, Asirwad, and RuralShores, among others. Besides, RuralShores, their other profitable exits thus far are Spandana, Janalakshmi and Satin.

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