India: Digital lending startups eye fresh funding as liquidity situation improves

A woman pulls out a credit card from her wallet. Photo: Pixabay

Several lending startups in India are returning to raise fresh equity because of an easing of the liquidity situation. The startups had kept their plans in abeyance following the liquidity crisis that struck the non-bank lending sector last year.

Domestic non-banking financial companies (NBFCs), which saw the fastest credit growth in the past few years, were weighed down by a severe liquidity crunch after defaults by Infrastructure Leasing and Financial Services Ltd (IL&FS) in September. Loan disbursals slowed amid a pressure on balance sheets as NBFCs struggled to repay short-term loans.

Digital lending startups, including Capital Float, Lendingkart and Rubique are looking to hit the road to raise fresh equity, according to two people aware of the matter

Rubique is in the initial stages of its fundraise, while Capital Float is in talks with investors to raise up to $150 million, Mint had reported on 4 December. Lendingkart will raise more than $100 million, said a person aware of the startup’s plans, requesting anonymity.

Lending startups either lend from their own resources through a NBFC or act as aggregators, using technology-based credit underwriting tools, for banks and NBFCs, providing them access to customers that the banks would generally not lend to because of a lack of formal credit scores. Capital Float and LendingKart have their own NBFCs and lend from their own balance sheets, while Rubique is an online lending marketplace.

“We were planning to raise fresh money in September last year, but like several others, we had to put our plans on hold,” said Manav Jeet, managing director and chief executive officer (CEO) of Rubique. “Investors get cautious during such a time and valuations become a concern when a sector is facing headwinds.”

Several digital lending startups, which saw their disbursements halve following the liquidity crisis, have turned more optimistic and have begun to revisit their fundraising plans, said a venture capital investor on condition of anonymity.

“Liquidity is quite robust now, significantly better than what it was in the immediate aftermath of the IL&FS event, and NBFCs with good track record continue to see traction from banks, financial institutions and even alternative investment funds,” said Ranvir Singh, founder and managing director, Kissht, which allows consumers to pay for their online orders in monthly instalments, without a credit card.

To be sure, even as the liquidity scenario has improved, investors are still cautious.

“Investment activity in lending space has been sluggish in last two quarters as investors have been waiting to see full impact of liquidity squeeze,” said Satyam Kumar, co-founder and CEO of Loantap, which offers loans and overdrafts to salaried professionals.

“Naturally, many NBFCs, small finance banks, MFIs and Fintechs are trying to tap the equity market to keep pace with the customer demand. However, unlike China, we are not producing unicorns every week, so there is no funding frenzy and PEs have been watchful of the developments,” he said.

This article was first published on livemint.com

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.