Alteria Capital has made its single largest investment of ₹80 crore in digital lender Lendingkart, in one of the largest startup venture debt transactions in India.
The investment comes at a time when non-banking financial companies are struggling to raise and disburse funds, with defaults and payment delays at several financial services firms.
“We have been tracking this space for a while and felt that there was an opportunity as good quality surfaces during difficult times. Lendingkart has diligently built a good granular book," said Vinod Murali, managing partner, Alteria Capital.
“It’s a large balance sheet, backed by strong investors with relatively low leverage; so, we were comfortable with the cheque size from our end," he added.
Founded by Harshvardhan Lunia and Mukul Sachan in 2014, Lendingkart offers collateral-free working capital and other business loans to small businesses. It also has another non-banking finance unit named Lendingkart Finance, which raises money from financial institutions and banks, and lends it out to customers.
It has also begun the process of raising equity capital of around $150 million, for which it has appointed Credit Suisse as an investment banker for the deal, said two people aware of the matter, on the condition of anonymity.
Credit Suisse and Lendingkart did not respond to emails seeking comment on the equity fundraise.
The company last raised ₹565 crore in February last year, led by Singapore’s Temasek-owned Fullerton Financial Holdings. Its other investors include venture capital funds Saama Capital, Bertelsmann India Investment and India Quotient.
Lendingkart is expected to use the debt raised to expand its loan book and help small businesses with working capital. “This should also aid in job creation across sectors at the grassroots level, which we feel very good about," said Murali.
Alteria, India’s largest domestically raised debt fund, is currently raising a ₹1,000-crore fund and has already invested in startups including two-wheeler rental firm Vogo, online education platform Toppr and juices brand Raw Pressery among others.
The large investment in Lendingkart also underlines the growing popularity of venture debt for startups, which can avoid diluting equity and help increase valuation by raising debt in early stages.
Mint reported on 1 May that 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. Digital lending startups including Capital Float, Lendingkart and Rubique are looking to hit the road to raise fresh equity.
However, defaults at Dewan Housing Finance Ltd, downgrades of several NBFCs and the resignation of auditor PWC at Reliance Capital and Reliance Home Finance have made startup lenders and their sources—banks and NBFCs—think again.