CapitalG leads $27.5m Series E for Indian NBFC
CapitalG, Google’s corporate venture arm that focuses on growth equity investments, has led an INR2.1 billion ($27.5 million) funding round for Indian non-bank lender Aye Finance.
Existing backers LGT Lightstone Aspada, Falcon Edge Capital, A91 Partners and MAJ Invest also contributed capital. Last year, Falcon Edge Capital invested INR2.3 billion in the company, which followed a Series C round led by CapitalG in 2018. Aye has raised more than $150 million in VC funding to date, according to AVCJ Research.
Founded in 2013, the company provides working capital and business development loans to micro, small and medium-sized enterprises (MSMEs) that are underserved by the traditional banking industry. It has a non-banking financial company (NBFC) license and raises debt funding to support its activities.
Aye claims to have disbursed INR30 billion in loans over the years to more than 200,000 micro-businesses. These include mortgage loans, seasonal and festival loans, and receivables-backed working capital loans. It has more than 70 branches across the country.
Aye Finance maintains that repayment levels are robust despite a nationwide shutdown that severely curtailed economic activity in the country. It continues to see growth prospects in the near term and will use the new capital to shore up its liquidity needs and ride out the crisis.
"Aye Finance's continued success is a testament to their industry leadership, their underwriting methodology, which combines an optimal mix of data science with physical presence in the field, and their ability to empower a huge, unaddressed market,” said Sumiran Das, a US-based partner at CapitalG.
Other VC-backed lenders that target Indian MSMEs as potential borrowers include Northern Arc Capital, Fullerton India, IndiaLends, Lendingkart, SMEcorner, NeoGrowth, Capital Float, and Indifi Technologies.
An increasing number of these lenders are fully digital operators in what is a growing sub-category within the space. The group is expected to struggle in the coming months but the increased pace of digitization within financial services and consolidation within the sector could lead to a rebound in fortunes for top players. Many digital lenders do not lend off their balance sheet but instead seek to link up borrowers with institutional sources of capital like banks.
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