Fullerton Financial Holdings (FFH), a Singapore subsidiary Temasekis about to acquire a majority stake in Loan Karta digital lending platform focused on MSMEs.
The deal, which involves an injection of Rs 252 crore, is pending regulatory approval. Lendingkart expects the capital infusion to boost its technological capabilities and expand its reach to underserved markets across India.
FFH, which already owns a 38% stake in Lendingkart, will gain majority control through this investment, although the exact ownership percentage has not been disclosed.
A significant cut in valuation
This fresh infusion of capital comes as Lendingkart faces financial difficulties. Reports suggest that the company’s valuation will drop significantly to around $100 million, a sharp drop from its valuation of $350 million in 2020.
The deal follows months of fighting for Lendingkart, which had been seeking between $30 million and $50 million in equity financing since last year. As a result, the new investment represents a crucial step in stabilizing the company amid growing challenges in the unsecured lending market.
The Lendingkart business model
Lendingkart, founded in 2014 by Harshvardhan Lunia, offers unsecured working capital loans to small and medium enterprises (SMEs) in tier 1, 2 and 3 cities. It operates through its non-banking financial company (NBFC) subsidiary, Lendingkart Finance Limited.
The company has disbursed over 3 lakh loans, totaling Rs 20,000 crore, with an average loan size of Rs 7 lakh. In recent years, Lendingkart has also expanded its co-lending partnerships with other banks and NBFCs, increasing its assets under management (AUM).
However, despite revenue growth, the company has faced profitability challenges. In FY24, Lendingkart’s standalone net profit fell to Rs 60 crore, compared to Rs 116 crore in the previous year.
The company also faced higher credit costs due to asset quality issues, as the unsecured nature of its loans made collections difficult.
FFH’s confidence in Lendingkart’s potential
“Our investments in Lendingkart are a testament to our continued belief in the opportunity for MSMEs in India and that scalable, well-governed franchises can bring significant value to small businesses,” said Hong Ping Yeo, CEO of FFH .
The fund infusion is expected to help Lendingkart overcome its financial hurdles and continue its mission of providing simplified financial solutions to small businesses across the country.
“This investment represents a vote of confidence in Lendingkart’s ability to transform the MSME credit landscape. We aim to replicate FFH’s past successes in the Indian financial market. With the support of FFH, we aim to bring more small businesses into the formal lending ecosystem,” said Harshvardhan Lunia, Founder and CEO, Lendingkart.
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