Deal focus: OfBusiness helps Indian SMEs find their feet

Creation Investments, a US-based private equity firm that focuses on socially responsible financial services, calls small to medium-sized enterprises (SME) the “backbone of modern economies” and sees India as an underserviced, growing market opportunity. It identifies the sector’s two main roadblocks as regulation and poor access to inputs, particularly financial capital. 

From this perspective, the GP could be seen as tackling half the country’s primary economic headwinds on multiple levels by leading an INR2 billion ($29 million) Series C funding round for New Delhi-based smart financing specialist OfBusiness, alongside Falcon Edge Capital. The company, which underwrites loans by evaluating financial data of local SMEs, will use the capital to develop an operating model that includes a raw materials platform and data contributed by a community of buyers and sellers. 

“We are great believers in the potential of SME lending in India towards the core sectors of the economy that have a high dependence on traders and distributors for working capital,” says Asish Mohapatra, co-founder and CEO, at OfBusiness. “With financial services partners such as Creation Investments and the right cost of capital through our debt lines, we will continue to bundle innovative lending and procurement solutions to address the growing needs of SMEs in India.”

As Creation has suggested, pumping cash into such operations can have a transformative effect. The latest deal, which included participation from existing investors Matrix Partners India and Zodius Capital, follows an INR750 million Series B and a $5 million Series A in 2016, which helped underpin a massive growth spurt. OfBusiness claims to have realized a 10x increase in its assets under management during 2017 while achieving bottom line profitability. 

Founded in 2015, the company manages an online marketplace that concentrates on SMEs in light to heavy industrial segments such as manufacturing and construction. The service allows companies to source unsecured credit lines and is said to enable the procurement of raw materials including polymers, cement and other building materials, with improved economic efficiency. 

The company claims to have registered some INR1 billion in monthly disbursals across 2,500 SME clients since attaining non-bank financial institution (NBFC) status in 2016. Revenue for 2017 came to INR2.2 billion and a target of around INR7.5 billion was set for this year.   

“OfBusiness captures the SME’s need for repetitive purchase finance with a unique business model,” says Vikram Vaidyanathan, a managing director at Matrix India, referencing the company’s track record raising debt lines from Kotak Mahindra Bank, Tata Capital, and RBL Bank. “Their proprietary data advantage is reflected in the increasing efficacy of underwriting and support from marquee banking partners.”   

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• Topics
• South Asia
• Expansion
• Technology
• Financials
• India
• Matrix Partners
• Growth capital