The term “fintech” is a combination of the terms “finance” and “technology,” relating to any company that employs software to help or streamline financial operations. The phrase refers to a fast-expanding sector that simultaneously supports consumers and corporations in a wide range of ways. Fintech offers a seemingly limitless number of uses, ranging from cellular banking and insurance to cryptocurrency and investing apps.
The sector is massive, and it will continue to grow for many years. As per CB Insights, there are “41 VC-backed fintech businesses estimated at a collective $154.1 billion.” Many traditional banks are enthusiastic supporters and adopters of the technology engaging in, acquiring, or collaborating with fintech companies because it is simpler to provide digitally-savvy clients with what they want while also propelling the sector forward and to be relevant.
CredAvenue is a fintech platform that links businesses looking for funding with financial institutions and other investors that may help them with credit offers using a variety of mechanisms. The firm isn’t a non-banking financial company (NBFC), which denotes that it doesn’t extend credit and instead facilitates transactions between parties on its platform.
Including over 1,500 corporate customers and 750 borrowers, the Chennai-based company currently has a cumulative loan amount of over Rs 72,000 crore. It now intends to expand its reach in the future year by adding additional enterprises and borrowers. The startup now covers six categories of lending activities: large cash flow term loans, loan origination, bond funds, restructuring, co-lending, and trade finance.
CredAvenue turns unicorn after raising $137 million
In the wealth management industry, a unicorn is a term used to denote a privately held startup with a valuation of $1 billion or even more. In the milestone year 2021, the rapidly growing unicorn sector inside the Indian startup ecosystem saw tremendous growth. In 2021, We’ve witnessed an average of three unicorns emerge per month.
During the pandemic, working remotely supported the expansion of virtual enterprises in India. It also gave birth to a lengthy list of unicorns. A flourishing digital-payments environment, a sizable smartphone user base, and virtual firm strategy have all converged to stimulate investment. Due to the massive increase in smartphone ownership and digitization of trade in every aspect of life during the pandemic, tech companies that have become worldwide brands are making an impression to India’s unicorn explosion.
After collecting $137 million in a round which was headed by Insight Partners, B Capital Group, and Dragoneer, debt platform CredAvenue Pvt. turns India’s latest unicorn. Sequoia Capital India, Lightspeed Venture Partners, TVS Capital, Light rock, Vivriti Capital, and Indian fintech CRED are among the company’s investors. It has raised more than $227 million so far. Insight Partners, one of the world’s most active modern tech investors, and Tiger Global Management are in discussions to head the deal, which will take place less than six months after the company’s initial investment round, which was estimated at over $400 million in September of last year. Sequoia Capital and Lightspeed India, two existing investors, will also contribute.
After India has certainly created seven unicorns eight weeks into the year, a completed deal will make the business a unicorn (private IT companies estimated at over a billion dollars). Banks and NBFCs would be able to collect debts on the same platform as a consequence of this agreement.
According to sources close to the sale, the business is presently generating an annual revenue of $25-30 million, or around $2.5 million (Rs 15 crore) every month. This would place the latest round’s valuation at over 40 times sales, putting it in the top end of software valuations at a time when other publicly traded software and fintech businesses’ stock prices are expected to plummet in 2022. CredAvenue has purchased a 75% share in Mumbai-based Spocto Solutions, an artificial intelligence and machine learning-powered debt recovery platform, for around $50 million to provide extra functionality to its customer banks and other financial institutions in addition to offering a marketplace.
CredAvenue is expected to address a need in the market for easy access to corporate finance, particularly in India, where debt is more difficult to issue than in other nations. India’s credit-to-Gross Domestic Product (GDP) ratio is expected to be approximately 56 per cent. The proportion is halfway of the G20 average, according to estimates from the Bank of International Settlements (BIS). India has a long approach in terms of development in terms of increasing loan accessibility, despite having a substantially lower percentage than its peers. CredAvenue intends to utilise the cash to grow its operations in India and other important worldwide countries, as well as to buy new businesses. It recently acquired Spoto, a company that specializes in collecting technologies.
Kabir Narang, the founding General Partner at B Capital Group said that CredAvenue’s value proposition of integrating investors and borrowers in a single-window environment to identify, facilitate, and monitor debt solutions and has piqued their interest. He has known Gaurav, CredAvenue’s founder, for some years and is pleased to support the excellent team that is digitizing India’s loan markets. India’s debt is still under-penetrated as a percentage of GDP, at 60%. CredAvenue, as a major player, has a huge chance here.
CredAvenue’s founder and CEO, Gaurav Kumar, anticipates the company to look at hyper-growth in the next few years. He noted that Indian debt markets are on the verge of revolution, similar to how stock markets were in the 1990s. They are the ones who are making the rules at the stage for the debt sector in India to reach its ultimate capacity. Nikhil Sachdev, Managing Director of Insight Partners will join CredAvenue’s board of directors as part of the latest arrangement. CredAvenue provides fast match-making and lowers mechanical and recurrent tasks in underwriting, implementing, and tracking debt by utilizing a next-generation business intelligence and data-collection platform, according to Sachdev.