Deal focus: Vivriti aims to bring debt online

Vivriti Capital, an Indian non-banking finance company (NBFC), could not celebrate its recent $50 million Series B fundraise led by LGT Lightstone Aspada. Two days after the deal was finalized, the state government of Maharashtra announced a complete shutdown in a bid to halt the spread of the coronavirus in the country. Other states have followed suit.

The pandemic at least has a silver lining for the company: it highlights the need for CredAvenue, an online marketplace launched by Vivriti in 2018 enabling third-party investors to subscribe to debt offerings by the company’s clients. “This has put us in a position of great responsibility as we start the next [financial] year,” says Gaurav Kumar, co-founder of Vivriti.

The marketplace emphasizes accuracy and convenience. For the former, issuers must disclose data beyond what is in the public domain and Vivriti employees meet borrowers and perform their own analysis as well. For the latter, a recommendation engine finds issuers who are a good fit for an investor’s credit risk tolerance, tenor and pricing requirements, while an integrated network offers connections to digitally-enabled law firms and auditors, thereby cutting down on paperwork.

“It has brought down transaction costs significantly. Even smaller issuers can come on our platform and do issuances,” says Kumar. Debt raised through CredAvenue over the past two years amounts to INR250 billion ($3.2 million) – a small amount, but loan activity has doubled every year.

Kumar believes the company can get more traction by offering a level of standardization online that isn’t present in traditional debt markets. “After being in this business for nearly 15 years, I think the time is right to take this market online. However, there are challenges as a first-mover – we need to personalize the platform [for investors] and handle back-end challenges around data protection,” he says.

Customer conversion can be added to this list. Notably, convincing corporate finance departments, especially in companies outside of the financial services sector, to use digital channels will be difficult.

Moreover, there are nearly 300 NBFCs in India jostling for the chance to offer financial products to enterprises of all sizes. To stand out from the crowd, Vivriti actively seeks out issuers and investors and co-lends out of its balance sheet. The latest fundraise – which comes after US-based Creation Investments provided $44 million across two rounds last year – will help in this respect.

The company also plans to double its number of technology and data science professionals to handle an increased load. In the long term, Kumar hopes CredAvenue, and other tech-enabled financiers, can help nurture the growth of a secondary market for debt. This would allow for better price discovery, giving non-investment grade borrowers access to money at cheaper rates.

And as the country slowly shuts down one city at a time due to COVID-19 and businesses look for alternative ways to raise cash, perhaps CredAvenue’s value proposition will appeal to the millions of Indian financial professionals working from home on their laptops.

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• Topics
• South Asia
• Early-stage
• Financials
• Technology
• India
• Fintech
• LGT Lightstone Aspada