NBFC cash crunch stings fintech firms
Capital Float’s funding talks with PayU got stuck due to doubts about its asset quality.
BENGALURU: Some fintech companies are facing a funding crisis while others are shutting shop, as the liquidity crunch among nonbanking finance companies (NBFCs) spills over into the digital lending space.
For Capital Float, one of the largest fintech NBFCs in the country, the talks to raise funds from digital payments major PayU are learnt to have got stuck in a prolonged due diligence process because of the former’s asset quality being under scrutiny.
The talks may, however, result in a complete sale at a lower valuation, two people in the know told ET. “The funding process is taking time and the valuation may get renegotiated down,” said one of the people.
ET reported in its February 19 edition that PayU was in talks with Capital Float to invest around $100-$150 million at a valuation of $500 million. “With this, the company could now be valued at somewhere around $400 million and a full acquisition is likely,” said another person close to the developments.
A Capital Float spokesperson said the news was “speculative in nature” and did not offer a comment.
Capital Float is backed by investors like Amazon, SAIF Partners and Sequoia Capital. ET understands that they could be looking at a complete exit through this deal.
Mumbai-based digital lending marketplace Rubique could be among the small startups that have taken a hit.
Rubique is understood to have trimmed its operations drastically and reduced staff strength to consolidate the business. “Most of the executives in Rubique have ventured out looking for other (opportunities),” said an ex-employee who did not wish to be named. “The company has been pitching to investors but nothing has materialised yet.”
The Kalaari Capital-backed startup has raised around $10 million since inception.
“We have been trimming down our cost, kept on hold our expansion plans and are trying to build up businesses which can help us generate steady revenue,” said Manav Singh, the founder of Rubique. Another Goa-based startup, Loan Singh, which raised funding from telecom major Airtel in 2017, is also understood to be struggling.
A source within the company told ET that the startup, which extended device loans for Airtel customers, could not scale up since the product itself never took off.
Industry insiders said many of these companies have not yet found a product market fit and their road to profitability looked doubtful. “Platforms do not get more than 3% of the loan amount as commission, and out of that, the offline agent takes away 2.5% or more, leaving almost nothing for these players,” said one of the persons quoted earlier.
A bunch of lenders that managed to create niche business models has, however, attracted investor interest. Zest Money recently closed a $20 million funding round led by Quona Capital while Mumbai-based Kissht and Paysense both are understood to be in the process of raising large rounds. Qbera, too, is in the process of picking up $15 million in its Series-B round.