Lending Tech

In India
The Rise Of Consumer
Lending Report 2020
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Table Of

Contents
01 Executive Summary 24 Financial Performance
Revenue And Expenses Of Indian Lending Tech Startups
02 India’s Lending Tech Landscape EBITDA Analysis

06 Consumer Lending: The Next Boom

34 Challenges: The Growing Number Of
Credit Demand
Credit Defaults
Unaddressed Opportunity

43 Covid-19 Impact On India’s Lending

08 B2B Lending
Market Opportunity In India
Tech Startups

14 Funding Journey For India’s Lending

48 The Impact Of Growing Formal Credit On
Tech Startups Indian Economy
Increase In Productivity And Sales
Funding And Deal Count
Wider New Venture Opportunity
Segment-Wise Segregation: Funding Amount And Deal Count
Increased Social Development
Funding Stage-Wise Distribution

Funding Type Segregation 50 Lending Tech In India: Key Terms

Average Ticket Size
52 Methodology
Geographical Distribution

Top Investors In Lending Tech 53 Bibliography

Executive Summary

Estimated credit Total funding raised Fastest growing fundung

$600 demand by $2.4 by lending tech startups Growth stage in the Indian lending
Bn Indian SMBs Bn between 2014 and Stage tech startup ecosystem
Q3 2020

Share of B2B focused

Number of credit
startups in the lending $2.2 Median revenue of
5.6 cards issued annually
54% tech startup funding Indian lending tech
Mn in India over the
between 2014 and Mn startups FY19
past seven years
Q3 2020

Most credit cards in The most active Lending tech startups

66%
India are issues by Sequoia venture capital firm
4/5 in India have negative
private sector banks Capital in India’s lending EBITDA
tech startup ecosystem

Number of Indian
120 employees in the formal Delhi- Top lending tech 147
Active lending tech
startups in India
Mn sector who do Tnot have NCR startup hub in India
access to credit cards

© Inc42 Media | not for distribution 01

India’s Lending Tech Landscape
B2B Lending B2B + B2C Lending B2C Lending P2P Lending Marketing Lending SaaS
Enabling credit Lending to consumers, Consumer loans Connecting Aggregating credit Providing tech for
for small startups and and credit products individual lenders products for digital lending
businesses and MSMEs across categorie and borrowers consumers and businesses
MSMEs businesses

OkCredit
Simple. Paperless. Secure

Source: Inc42 Plus © Inc42 Media | not for distribution 02

Digital Lending Most Popular Channel For New-To-Credit
Borrower
With the growing penetration of smartphones and internet subscriptions, the popularity of
lending through fintech platforms is expected to keep growing

Fintech 29

Regional Rural
13
Bank

NBFC 10
Channels

Private Banks 10

Pubic Banks 9

Cooperative Banks 8

Foreign Banks 5

0 10 20 30

% of new credit borrowers by lenders type

Source: BCG Analysis

© Inc42 Media | not for distribution 03
Private Sector Banks Have Lion’s Share Of India’s
Credit Card Market
41% or (24 Mn out f the total 57.8 Mn) credit cards in the India are issued by HFDC
and ICICI bank in India

Foreign Banks
11.5%
6,652,018
13,149,298

22.7%

57.8 Mn

Private Sector Banks

38,029,281
65.8%

Source: RBI, Inc42 Plus Analysis

© Inc42 Media | not for distribution 04
Digital Lending In India: The $1 Tn Opportunity
Historical Numbers Forecast 270%

350

270

200

23%
150

110

75

58
7%
46
33
23
9 14

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
$1 Trillion

Digital Lending ($ Billion) Digital Lending/ Total Lending (%)

Source: CIBIL, BSG Google Digital Lending Survey, 2018, BSG Ananlysis
© Inc42 Media | not for distribution 05
CONSUMER
VS B2B LENDING
AN OVERVIEW
 India’s Credit Card Base More Than Doubles From 2016
On an average 5.6 Mn credit cards were issued annually over the past seven years

The number of credit cards in India is

60.0 growing at a compounded annual growth
rate of 24% ( 2013- 2019) as credit-based
57.8
55.3` purchases become more common even
in semi-urban areas
Number of credit cards ( in Mn)

44.2 In addition to traditional credit cards, the

40.0 demand for sachet credit products such
as‘pay later’ and ‘early salary’ is also
35.5 increasing.

28.3 Between FY18 and FY20, on an average

20.0 22.7 3.1 Mn new employee provident funds
20.4 accounts were created every year,
18.7
indicating growing formal employment
in the country.

India’s gross per capita income has surged

0.0 90% from $1,120 (2009) to $2,130 (2019).
2013 2014 2015 2016 2017 2018 2019 2020
(Upto August)
Besides increasing formal employment
Calender Year and growing income levels, there has
been a spike in demand for digital credit
products in 2020 due to the economic
impact from the pandemic

Source: RBI, Inc42 Plus Analysis

© Inc42 Media | not for distribution 07
The Unaddressed Market In Consumer Lending
Credit Card Penetrations In India’s The Addressable Market For Credit
Formal Employment Sector Remains Card In India
Low
120

125
120
100
Credit Cards
Penetrations
70 75
In Active EPFO
Account (%)

In Mn
50
Credit Cards
Penetrations 32
In EPFO 35
Account (%) 25

0
0 20 40 60 80 Total number of active EPFO Total number of EPFO
account without credit card account without credit card

Total credit cards as a % of the respective EPFO count

Source: Inc42 Analysis, EPFO data, RBI

Note: Calculated as the number of total credit cards
among EPFO accounts
© Inc42 Media | not for distribution 08
The Addressable SMB Credit Demand In India Around $600 Bn
45% of the total credit supply in B2B lending in India is through informal channels and the
unorganised market

600 Lack of adequate and reliable financial

267 600 data, and higher servicing costs are the
primary factors limiting formal credit
access to SMBs in India.

Informal lenders charge interest rates as

Credit Demand (In $ Bn)

400 high as 30% per annum, as opposed to the

RBI’s average base rate of 8.67%, which
22% ultimately hurts sustainability of small
133 businesses
45%
(Informal Credit)
Digital solutions such as alternate data-
33% based risk models and underwriting could
200
200 help reduce cost of providing credit for
underserved SMBs

0
Borrowing in entity name Borrowing (Unmel Demand) (Total)
in proprietor name

(Formal Credit)

Positive Negative Total

Source: BCG Analysis

© Inc42 Media | not for distribution 09
Consumer Tech Giants Entering Lending Market
Consumer Base: > 80 Mn
Key Lending Partners:
Aditya Birla Finance Ltd,
Money View, EarlySalary,
Zestmoney and Credividya
Lending Products:
Peronal loans, Gold loans
Consumer Base: N/A
Key Lending Partners:
Axis Bank, GetClarity Fintech
Services,Tata Capital,
Tata Motors Finance
Lending Products:
Vehicle loan , Micro-loans,
Rewards
Source: Inc42 Analysis, Company Websites
Consumer Base: > 100 Mn
Key Lending Partners:
Bank of Baroda, ICICI Bank,
Capital Rock,
Karur Vysya Bank (KVB)
Lending Products:
PayLater, MSME lending,
Cobranded credit cards
Consumer Base: > 100 Mn
Key Lending Partnes:
Standard Chartered Bank India,
Bajaj Finance, RBI Bank
Lending Products:
Restaurant loans , PayLater,
cobranded credit cards
Consumer Base: > 100 Mn
Key Lending Partners:
SBI,Bt ank of Baroda, AxisBank,
Aditya Birla Finance, Tata Capital,
Flexiloans, SIDBI, LendingKart,
Indifi, Happy Loans
Lending Products:
PayLater,Working capital loans
Consumer Base: > 45 Mn
Key Lending Partners:
EarlySalary, LendingKart
Lending Products:
Personal loans , business loans
© Inc42 Media | not for distribution 10
Consumer Base: 2100 Mn riders
25 Mn driver-partners
Key Lending Partners:
SBI, Avail Finance, Cashfree,
Bhartiya Micro Credit
Lending Products:
Daily car loan repayment
scheme, Micro-loans,
cobranded credit cards
Consumer Base: > 25 Mn
Key Lending Partnes:
EarlySalary, LendingKart,
Credit Mantri
Lending Products:
Personal loans , digital SME loans
Rise Of Recovery Focussed Lending Tech Startups
Startups Key Investors Recovery-oriented solutions
CreditMate Collect,
Paytm, CreditMate Pay and
India Quotient CreditMate Score
Govt of Haryana grants, Risk Mitigation via device
Startup bootcamp management, collections,
FinTech, Dubai digitisation and predictive
fraud management
Recorded payment
N/A platform, Automated
notifications / Reminders
until the due is paid
Warburg Pincus and Data aggregation and
Bessemer Venture analytics, invoice
Partners financing platform
Collection & legal services
Accel, Titan Capital and SaaS
Self learning integrated
Oracle, Stanford Angels debt management
and Entrepreneurs, platform, data driven
AngelList collections portfolio
analysis and liquidation
services
Key Clients
Finance Forward
MENA 2020 program
Shipyaari, Cona Electronics,
Virtusa Lifespaces,
Way2Online, Furniture World,
Namma Dhobi, Spectra India,
Technosoft, Lotus Lap School,
Kleenco, Spandana Spoorthi
Microfinance, and TV5
HDFC Bank, Yes Bank and Axis
Bank, NBFCs such as Capital
First and Bajaj Finserv
Kotak Mahindra Bank
and ICICI Bank
PayU, Flexicons,
Faircent, Muthoot
© Inc42 Media | not for distribution 11
The Growing Lending Tech Partnerships, Products

FINTECH-FIN FINTECH-TECH

P2P Online
Marketplace Lending

Individual investors Investors, mostly Offer Advanced Credit Scoring,

Business Model and borrowers meet institutional, lend money Credit Automation, NPL
to realise money to borrwers management and Regulatory
exchanges monitoring/ reporting (RegTech)

Risk taken by the Risk is transferred Specialization of Services

Key-Feature investor from the investor to
the platform

Years Of Activity 10 years old or even less 10 years old or even less Some were founded in the ‘80s

Loans are generated Represent as alternative B2B approach. Fintech provide

Relationship by partner banks and to traditional lending infrastructures to banks
With Banks then transferred through offered by Banks
loan notes

Source: Accenture
© Inc42 Media | not for distribution 12
FUNDING JOURNEY
FOR INDIA’S LENDING
TECH STARTUPS
India’s B2B Lending Stage Startups

$107.8 Mn $143.6 Mn $143 Mn $254.4 Mn $22 Mn

₹1 - ₹75 Lakh ₹3 - ₹1 Cr <₹1 Cr ₹1 Lakh - ₹10 Cr Up to ₹2.5 Cr
₹1,340 Cr ₹1,196 Cr ₹2,421 Cr ₹2,250 Cr N/A

$128.78 Mn $36 Mn $83 Mn $261 Mn

₹0.3 Lakh - ₹5 Cr ₹1 - ₹50 Lakh <₹2 Cr ₹50,000 - ₹25 Lakh
₹861 Cr ₹300 Cr ₹805 Cr ₹1,500 Cr

Total Funding Ticket Size Asset Under Management

Note: Asset under management as per

latest available figures.
Source: ICRA, News Reports; Company Sources
© Inc42 Media | not for distribution 15
 Over $2.4 Bn Invested In Lending Tech Startups From 2014 Onwards
B2B lending bagged the majority of the funding from 2014 to Q3 2020 with a 54% share whereas
funding for B2C lending startups has dropped in the past year

800.0
With venture capital inflow in B2B lending
738
startups growing at CAGR(2015-2019) of
72%. It remains the most favoured lending
87.7
tech sub sector among investors.
585
600.0
Funding Amount (in $ Mn)

Over the years the rise of buy now and pay

107.7
later (BNPL) startups in India the funding
133.7 amount in B2C lending startups is picking
pace. The recoded CAGR between 2016 to
400.0 375 2019 for this subsector is 50%
109.2

280 284
80.6 Growth stage is the most preferred sector
17.2 482.4 for venture capital investment in lending
74.7
200.0 103.0 68.5
tech startups. In both funding amount and
147 300.4 deal count the share of growth stage
4.5
51.3
investments is 60% and 40%, highest
199.4
21.0 141.3 among others
116.9
20.5 54.6
0.0
0.0
2014 2015 2016 2017 2018 2019 2020 (Till Q3)

Year

Others Marketplace B2C Lending B2B-B2C Lending B2B Lending

Source: Inc42 Plus

© Inc42 Media | not for distribution 16
 Nearly Half Of All Lending Tech Funding Deals Are In B2B Sector
B2B lending has consistently been at the top when it comes to funding deals, accounting for
44% or 137 of the total 313 deals

80

71 70

64

60
7 5
Deal Count

42 22
40 25
20 36

5 4
23
9 10
20
33
2 29 28
5
7 18 17

1 9
5
0
2014 2015 2016 2017 2018 2019 2020 (Till Q3)

Year

Others Marketplace B2C Lending B2B-B2C Lending B2B Lending

Source: Inc42 Plus

© Inc42 Media | not for distribution 17
 Funding For Growth Stage And Late Number Of Growth Stage Deals Higher
Stage Startups Is Growing At The Compared To Seed Stage
Fastest Rate
Our 50% of all funding deals in Lending Tech from
2019 have seen for growth and later stafe startups

800.0 80
738
71 70
Funding Amount (in $ Mn)

64

600.0 585 233.2 60

Deal Count
20
31
25
42
284 375
400.0 40 16
269.1 36
5
280 96.6 173.5 19
11
160 23 11
484.4
200.0 20 1
147 9 31 11
256.5 234.2 30
67.0 170.3 208.2 2 21 23
7
10 12
20.5 73.2 3
0.0 0.0
0 1
2014 2015 2016 2017 2018 2019 2020 2014 2015 2016 2017 2018 2019 2020
(Till Q3) (Till Q3)
Year

Bridge Stage Seed Stage Late Stage Growth Stage Bridge Stage Seed Stage Late Stage Growth Stage

Source: Inc42 Plus

© Inc42 Media | not for distribution 18
Investor Confidence In Growth Stage Equity-Based Funding Leads The Way In
Startups Indicates Scaling Up Potential Indian Lending Tech
For Lending Tech In India

Convertible Debt
Growth Stage 60 9.9%
31
Venture Debt
19 6.1%
Late Stage 37

Seed Stage 32
313 Funding
Deals
Bridge Stage 22

0 20 40 60

Funding Amount : CAGR % (2015-2019)

Equity Funding 263
84.0%

Source: Inc42 Plus

© Inc42 Media | not for distribution 19
Average Ticket Size For Lending Tech Funding Shoots Up After 2017
Average ticket size of funding in Indian lending tech startups has more than doubled since 2017
and is growing at a CAGR of 15%

15.0
Average Ticket Size of Funding (in $ Mn)

13.4

10.0
8.2
8.9
7.7

5.0 5.3

0.0
2015 2016 2017 2018 2019

Year

Source: Inc42 Plus

© Inc42 Media | not for distribution 20
Bengaluru-Based Lending Tech Startups Dominate VC Funding
79% of the total funding was poured into the top three startup hubs — Bengaluru,
Mumbai and Delhi-NCR

Bengaluru 682

Mumbai 653

Delhi-NCR 607

Ahmedabad 226
Hubs

Chennai 219

Pune 49

Others 17

0 200 400 600 800

Funding Amount (In $ Mn)

Source: Inc42 Plus

© Inc42 Media | not for distribution 21
Delhi-NCR Lending Tech Startups Bag Most Number Of
Funding Deals
Delhi-NCR is home to notable lending tech startups such as Aye Finance, OfBusiness and Indifi

Delhi-NCR 85

Mumbai 72

Bengaluru 64

Chennai 20

Ahmedabad 13

Others 14

0 25 50 75 100

Deal Count

Source: Inc42 Plus

© Inc42 Media | not for distribution 22
Most Active Lending Tech Startup Investors In India
Investors Deal Participation Notable Startups

21

16

13

13

12

11

10

10

Note: This ranking is based on the deas recorded in our internal database
between 2014 to Q3 2020
Source: Inc42 Plus © Inc42 Media | not for distribution 23
LENDING TECH
STARTUPS:
THE STATE OF
FINANCIALS
 The Aggregate Revenue Of Lending The Aggregate Expense Of Lending Tech
Tech Startups Nearly Doubled In FY19 Startups Grew Significantly In FY19 To
To $355 Mn $441 Mn

400 500

Aggregate Expense (In $ Mn)

355 400 441
Aggregate Revenue (In $ Mn)

300 % %
71 60
300
200 208 275
200

100
100

0 0
FY18 FY19 FY18 FY19

Note: This analysis is based on the 31 most-funded lending tech

startups which accounted for 89% of the total funding in this sector
Source: Inc42 Plus, MCA
© Inc42 Media | not for distribution 25
From a Macro Perspective On Average, The Revenue Growth Over The Past Two
India’s Lending Tech Startups Are Fiscals Indicates The Market Potential
Loss-Making For Lending Tech Startups

59%

5
5

4
Revenue 133
Amount (In $ Mn)

3 3.2
110%

2 2.2
Expense 90

1
1.03

0 0 50 100 150
Median Revenue Median Expense

FY18 FY19 Median % Surge (FY18 to FY19)

Note: This analysis is based on the 31 most-funded lending tech

startups which accounted for 89% of the total funding in this sector
Source: Inc42 Plus, MCA
© Inc42 Media | not for distribution 26
India’s Top Lending Tech Startups By Revenue

Startups Revenue FY19 Revenue FY18 Startups Revenue FY19 Revenue FY18

$86,930,144 $57,316,960 $5,266,383 $2,329,971

$43,690,202 $35,021,210 $4,422,089 $3,384,553

$36,474,611 $19,467,118 $4,191,110 $1,611,960

$35,417,536 $13,003,127 $3,971,225 $385,865

$31,348,357 $11,848,141 $2,862,291 $573,314

$22,445,259 $13,982,853 $2,169,524 $1,182,507

$20,255,648 $10,097,867 $2,160,879 $470,634

$17,448,963 $15,777,003 $2,019,049 $2,410,793

$12,329,611 $5,302,493 $1,959,496 $964,352

$8,852,925 $7,872,925 $1,355,231 $578,963

Note: INR to USD exchange rate is 69.4

Source: Inc42 Plus, MCA
© Inc42 Media | not for distribution 27
India’s Top Lending Tech Startups By Revenue

Startups Revenue FY19 Revenue FY18

$1,239,712 $495,778

$1,200,245 $782,233

$1,176,916 $153,329

$1,146,830 $796,945

$1,117,896 $270,865

$918,991 $247,752

$834,179 $166,715

$578,963 $1,034,942

$532,291 $162,378

$132,824 $19,539

$105,317 $15,245

Note: INR to USD exchange rate is 69.4

Source: Inc42 Plus, MCA © Inc42 Media | not for distribution 28
The Lending Tech Startups That Made Maximum Spent In FY19

Startups Expense FY19 Expense FY18 Startups Expense FY19 Expense FY18

$86,128,674 $57,481,671 $10,275,231 $8,126,916

$50,663,429 $32,742,046 $9,673,818 $4,391,758

$43,067,334 $38,421,138 $8,665,187 $10,687,363

$36,443,746 $14,275,202 $7,804,222 $3,183,357

$35,391,023 $31,578,790 $6,674,236 $4,829,510

$30,686,974 $16,331,614 $5,058,833 $3,256,729

$26,691,816 $11,516,513 $4,632,997 $2,397,767

$81,635,821 $9,078,833 $4,513,948 $2,151,239

$17,723,012 $4,340,605 $4,266,037 $3,136,398

$10,885,937 $5,719,640 $3,380,043 $1,277,291

Note: INR to USD exchange rate is 69.4

Source: Inc42 Plus, MCA
© Inc42 Media | not for distribution 29
 The Lending Tech Startups That Made Maximum Spent In FY19

The Lending Tech Startups That Made Maximum Spent In FY19

Startups Expense FY19 Expense FY18

$2,912,305 $699,769

$2,674,856 $1,423,631

$2,546,686 $1,531,542

$2,378,026 $1,847,277

$1,972,190 $1,634,640

$1,765,620 $1,150,490

$1,708,314 $361,369

$1,553,314 $771,571

$1,204,640 $464,452

$781,167 $267,464

$736,657 $209,957

Note: INR to USD exchange rate is 69.4

Source: Inc42 Plus, MCA © Inc42 Media | not for distribution 30
Every 4 Out Of 5 Lending Tech Startups In India Have Negative
EBITDA
Customer acquisition and credit recovery cost are two of the biggest barriers to sustainability for
lending tech startups in India

7
EBITDA Positive
22.6%

EBITDA Negative
77.4% 24

Note: This analysis is based on the 31 most-funded lending tech startups

which accounted for 89% of the total funding in this sector
Source: Inc42 Plus, Tofler
© Inc42 Media | not for distribution 31
India’s Lending Tech Startups: The Unit Economist Test

Startups EBITDA FY19 EBITDA FY18 Startups EBITDA FY19 EBITDA FY18

$15,419,308 $1,030,259 -$5626,801 -$221,902

$14,317,003 $4,340,058 -$704,611 -$252,161

$12,296,830 $9,391,931 -$770,893 -$165,706

$9,566,282 $5,250,720 -$1,099,424 -$878,963

$5,582,133 $1,389,049 -$1,400,576 -$914,986

$3,955,331 $1,391,931 -$1,488,473 -$1,427,954

$691,643 $353,026 -$1,730,548 -$1,587,896

-$109,092 $17,853 -$2,139,796 -$1,870,317

-$378,963 -$518,732 -$2,152,738 -$1,364,553

-$600,865 -$204,611 -$2,324,207 -$641,210

© Inc42 Media | not for distribution 32

India’s Lending Tech Startups: The Unit Economist Test

Startups EBITDA FY19 EBITDA FY18

-$2,655,620 -$1,090,778

-$2,681,556 -$1,141,210

-$2,806,916 -$1,955,331

-$3,455,331 -$2,814,121

-$4,835,735 -$2,533,141

-$5,401,153 -$2,722,911

-$6,010,086 -$4,991,354

-$9,348,703 -$7,092,219

-$13,067,723 -$3,929,395

-$13,644,092 $56,556

-$18,103,746 -$16,940,922

© Inc42 Media | not for distribution 33

CHALLENGES:
THE STATE OF
DEFAULTS AND
AUMS AMONG
LENDING TECH
STARTUPS
The Moratorium Effect On Loan Categories

The RBI imosed moratorium on EMIs for certain lending

categoriescreated a panic situation in the market and
froze up supply of credit into formal institutions to a large
extent in the early months of the lockdown.

The moratorium was meant as a relief but could increase

the NPA and bad loan burden on lending tech startups.
Already, NPAs were on the rise in FY19 for many startups.
Home Loan Personal Loan
63% 40%

Vehicle Loan Education Loan

23% 6%

Source: ET Wealth Survey

© Inc42 Media | not for distribution 35
Indian Banks See Deep Cuts Due To RBI Moratorium
The share loans under moratorium by category in Indian banks in September 2020

90

80

70

60
% of value

50

40

30

20

10

0
State-owned Banks Private Banks NBFCs All Banks

Note: MSME= Micro enterprises and SMEs. NBC= Non-bank financial company.
RBI data cintrast with that of many banks where reported figures for loans under
moratarium were below 20%
Source: Fitch Ratings, RBI © Inc42 Media | not for distribution 36
NPAs Rise For Capital Float In FY19

FY19 FY18

Total assets (INR billion) 12.4 9.9

Total equity (INR billion) 5.2 3.9

Net Profit (INR billion) -1.0 -0.9

Return on average assets (%) -8.8 -12.4

Equity/Assets (%) 41.7 38.9

Capital adequacy ratio (%) 41.0 44.7

NPA as a % of AUM (%) 4.8 2.5

Source: India Ratings And Research

© Inc42 Media | not for distribution 37
Lendingkart Swims Against Rising NPA Tide In FY19

FY18

FY19
FY19 FY18
FY18

Total
Totalassets (INR
assets (INR million)
million) 23,820.0
23,820.0 15,963.1
15,963.1

Total
Totalequity (INR
equity (INR million)
million) 7,228.7
7,228.7 4.834.9
4.834.9

Profit
Profitbefore tax(INR
before tax (INR million)
million) 419.4
419.4 192.0
192.0

Net Profit
Net Profit (INR million)
(INR million) 296.5
296.5 277.5
277.5

Return
Returnon average
on average assets
assets (%) (%) 1.5
1.5 2.6
2.6

Equity/Assets (%)
Equity/Assets (%) 30.3
30.3 30.4
30.4

Capital
Capitaladequacy ratio
adequacy ratio (%) (%) 36.2
36.2 39.0
39.0

NPA as
NPA asa
a% ofAUM
% of AUM(%)(%) 1.1%
1.1% 1.9%
1.9%

Source: India Ratings And Research

© Inc42 Media | not for distribution 38
NEOGROWTH Claws Back Revenue In FY19

FY19 FY18

Total assets (INR million) 12,505 11,647

Total equity (INR million) 4,321 4,255

Net Income (INR million) 43 -236

Return on average assets (%) 0 -3

Equity / Assets (%) 35 37

Capital adequacy ration (%) 36 52

NPA as a % AUM (%) N/A N/A

Source: India Ratings And Research © Inc42 Media | not for distribution 39
AYE Finance AUM Surges In FY19

FY19 FY18

Total tangible assets

(INR million) 12,433 5,100

Total tangible equity 4,877 894

(INR million)

Net profit/loss (INR million) 251 23

Tangible Equity/Assets (%) 39 18

Debt-to-equity 1 5

Tier-1 ratio 44 20

NPA as a % AUM (%) 1.8 1.5

Source: India Ratings And Research

© Inc42 Media | not for distribution 40
 INTELLEGROW Curbs Spending In FY19 To See Growth

FY19 FY18

FY19 FY18

Total tangible assets 4,094 3,777

(INR million)

Total tangible equity

(INR million) 1,548 829

Net income (INR million) 19 -200

Return on averageAssets (%) 1 -6

Tier-1 capital (%) 42 27

Equity/Assets (%) 38 22

NPA as a % AUM (%) N/A N/A

Source: India Ratings And Research

© Inc42 Media | not for distribution 41
SIDBI’S Gross NPA Highest In Past Three Years
Compared to FY17 ($119 Mn) the total value of gross NPA surged 20% to $150 Mn in FY20

150 Small Industrial Development Bank of

150 India (SIDBI) primary purpose is to
provide refinance facilities and short
130 term lending to industries, and serves
Closing Gross NPA (In $ Mn)

125
119 as the principal financial institution in
100 the MSME sector.

In FY20, SIDBI sanctioned direct loans

(primarily to MSMEs) worth $1.4 Bn, an
11% surge compared to the previous
50
financial years— $1.3 Bn.

SIDBI in collaborating with CRISIL and

TransUnion CIBIL introduced— CriSidEx,
0 a composite index based on a diffusion
FY17 FY18 FY19 FY20 index of 8 parameters and measures
MSE business sentiment on a scale of 0
(extremely negative) to 200 (extremely
positive). This would map the MSME
sentiment for structural and market
influenced changes.

Note: INR to the USD exchange rate 69.4

Source: SIDBI, Inc42 Plus
© Inc42 Media | not for distribution 42
COVID
IMPACT ON
INDIA’S
LENDING
TECH
STARTUPS

Arindam Das
CEO- DMI Consumer Credit
(DMI Finance Private Limited)
Source: *As per the Credit Disrupted: Digital MSME Lending in India report
In India, Micro, Small, and Medium Enterprises (MSMEs) contribute more than 30% of the
National Gross Domestic Product (GDP), employs over 12 crore people, and account for over
50% of India’s total exports. Despite such significant contribution, MSMEs for decades have been
constrained by limited access to finance with less than 10% having access to formal credit, and
the majority (99%*) of this credit is delivered non-digitally.
The Covid-19 pandemic has further fuelled the already unsatiated credit demand and with
delayed receivables, most traditional lenders are less willing to provide loans as their risk
appetite has declined considerably amidst the rising NPAs. Several steps by GOI; such as
Moratorium and now ex-gratia are well intended but will have a marginally positive impact on
the industry.
In the short to medium term, Covid-19 and the resultant aftershock has negatively impacted
the MSME sector with an unprecedented reduction in demand, disrupted supply chain, and
weakened formal financing options to sustain their operations.
Before Covid, owing to the large credit need of MSMEs, several Fintech Lenders entered this
segment with technology-enabled operating and business models that delivered
uncomplicated on-boarding/ KYC processes, prompt decision making, and instant disbursals
across the lending value chain, allowing these entrants to serve previously credit-devoid
MSMEs. However, many such players are now fighting for their own survival as liquidity (equity
and debt) has collapsed and delinquencies have risen dramatically.
This bleak situation is resulting in a profound paradigm shift, through the rapid digitization of
Indian MSMEs that started after demonetization and is expected to accelerate even further in
this situation. Several of the digital initiatives from the government and regulators such as UPI,
© Inc42 Media | not for distribution 44
Digital Locker, AePS, BBPS, GSTN, OCEN, and TreDs are now being adopted faster allowing for delivery of innovative financing
solutions such as flow-based lending that suits the current business environment. The advent of a slew of well-funded
startups from bookkeeping/accounting, neo-banking, payment/wallet, and trade platforms have also aided the MSME
digitization and unmasking data to lenders. Further, when Account Aggregators (AA) get operationalized, digital lenders will
have access to enhanced real-time financial information on MSMEs’ that will help in streamlining credit underwriting and
its delivery. There are also several innovations on the repayment structuring allowing MSMEs to pay as they earn on
daily/weekly frequency.

As innovations sprout across the chain, the key to this financing bridge remains the digitization of MSMEs on one side and
technology-driven digital lenders on the other. We at DMI and our Fintech Partners have been deploying tech-focussed
solutions to serve MSMEs more quickly and efficiently than the larger traditional incumbents for several years now. During
this pandemic phase, we have deployed more resources and launched several innovative products such as ‘Lockdown
loans of up to 50k’ with flexible repayment plans. There is a clear heightened urgency to get back on the growth trajectory
industry-wide and at DMI we have financed several sunrise / resilient sectors such as essential goods, healthcare, or
manufacturing that continue to present opportunities to focus on in the short-term.

In the long-run, MSMEs will continue to be India’s backbone, and providing customized financing solutions is the need of the
hour. For this, every industry participant including digital lenders must work in tandem to deliver resources that will see them
flourish and prosper, and hopefully, in the near future, the financing challenges of MSMEs will be largely alleviated.

© Inc42 Media | not for distribution 45

Indian Lending Tech Startups: February Vs August 2020

Proper Loans P2P Lending Creditline For

Businesses
30% 30-40%
65-70%

Collateral Free
Short-Term Credits SME Loans B2C+B2B Loans

70-80% of 80% 85%

the supply

Key Products Business Recovery (As of August, 2020)

Note: Business recovery calculated based on pre-Covid

levels i.e Feburary 2020
© Inc42 Media | not for distribution 46
Lending In The Times Of Corona And The Great Recession 2.0

Digital kending to gorw manifolds

The account aggrevators, v-KYC likey to

be adopted faster in order to reduce
Most Likey costs and time
Scenario
Distribution partners

Most Impacted Lenders targeting credits/ loans to brown

Lending In The Segments collar people, such as maids, cab drivers,
Times Of Corona
labourers etc.
And The Great
Recession 2.0 Most Responsive
Economy Rural economy, thans to rains,
agriculture is back on track

Most Suppliable
Products Low risk products such as short term
credit offers, loans against securities

Immediate Measures
Required From The Portfolio rebalancing and redistribution
Lending Ecosystem
Lenders to reduce operational costs,
credit costs to lower the risk

© Inc42 Media | not for distribution 47

THE IMPACT OF
GROWING FORMAL
CREDIT ON
INDIAN ECONOMY
Increase In Productivity
India has both one of the largest working populations and medium-small enterprises community in the world but labour efficiency
remains a big issue on the macro scale. A report by IMD titled “World Competitiveness Ranking 2020” ranked India 32 out of 63 countries
in terms of business efficiency. With a 43rd rank on the overall world competitiveness index compared to Chinas’ 20th
Enabling more channels for formal credit facilitation can help the SMBs acquire quality infrastructure and labour which will boost the
overall productivity of the sector.

Wider New Venture Opportunity

Apporximately 7% (3,297 out of 55,000) of the total startups in India are funded which means a large proportion of the startups are fulfilling
their capital requirement either through loans, revenue or bootstrapping. Greater access to digital unsecured loans can help the non
venture capital backed startups in India to access credit at a relatively cheaper rate.
In addition to the limited venture capital funding opportunities. There is also a skewness of venture capital inflow towards the top three
startup hubs in India— Bengaluru, Delhi NCR and Mumbai. Between 2014 to Q3 2020, 90% ($60 Bn out of $66 Bn) of the total funding in
Indian startups were in these top three startup hubs.
As acknowledged in the Economic Survey 2019-20, A 10% increase in registration of new firms in a district yields a 1.8 % increase in Gross
Domestic District Product (GDDP). Ascertaining the fact that promotion of entrepreneurship is important for all round development of the
country.

Increased Social Development

From business development to education, the demand for credit remains high among both. With limited formal channels of credit the
consumer is usually paying a premium on the interest rate when opting for credit facilitation from informal lending institutions. A digital
credit facilitation facility will help in expanding the ambit of financial inclusion in the country, opening up more opportunities for the
non-urban dwellers in the country. Furthermore enhancing the social development of the economy.

© Inc42 Media | not for distribution 49

Lending Tech In India: Key Terms
Annual Percentage Rate (APR): A loan’s APR is essentially its overall finance charge. It includes the principal as well as the interest component
of the loan, and is shown as an annual rate. The APR enables customers to compare various loans with different charges and interest rates.

BYPL: Buy now pay later services (BYPL) are short term micro credit lines given to an individual with basic or no preliminary credit check.
These micro credit lines are provided both by fintech companies and the registered NBFCS. Some active BYPL players in India are— Simpl and Lazy Pay.

Collateral: A collateral can be any asset that backs your loan. In case of failure to repay the loan on time or continuously default on payments, the
lender has the right to repossess the asset you pledged as collateral for the loan

Credit Agency: Organisations that review your credit information and create credit reports that can be checked by lenders to determine your
eligibility for a personal loan. Some active credit agencies in India are— CIBIL and Experian.

Credit History: It is a record of all the borrowing and repayment transactions an individual has undertaken. It is one of the most crucial factors that
determine an individual’s eligibility for a personal loan

Credit Score: A credit score is an individual’s valuation and ability to repay a loan. It is computed based on his/her history of borrowing and repaying.

Default: In case a borrower does not meet the legal obligations of a loan, he/she is said to be defaulting on the loan

Fixed Interest Rates: Interest rates that remain unchanged over the tenure of the loan are called fixed interest rates.

Floating Interest Rates: As opposed to the working mechanism of fixed interest rates, floating interest rates are those that keep changing over the
tenure of the loan.

Source: BankBazaar, Inc42 Plus

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Guarantor: A guarantor is essentially an individual who guarantees that you will repay the loan in full. Lenders usually require guarantors when the
credit history of a borrower is not up to the mark. In these cases, guarantors become legally liable for the repayment of the loan.

Interest Rate: Interest rates are basically the cost paid by the borrower for availing a loan from a lender. It is a percentage of the loan amount that will
have to be paid along with the principal amount every month.

Late Payment: When you delay your monthly EMI payments, it is called late payment and lenders usually charge a late payment fee to customers who
do not make their payments on time.

Line of Credit: Lines of credit are essentially loans that do not require any kind of security or collateral and are usually offered at variable interest rates

Loan Agreement: It is the official document representing the terms and conditions of a personal loan. It also includes the rights as well as the obligations
of a lender and borrower.

Payday Loans: These loans are unsecured personal loans that can be availed based on your job. They are ideal for financial emergencies. In case you
run short of money towards the end of the month, payday loans can be taken for a few days and the repayment can be done once your salary is
credited to your account.

Prepayment Fees: In case you wish to repay your loan ahead of schedule, you will be charged a prepayment fee. Not all lenders charge this fee, but
those that do levy a charge in order to recover some of the money they were expecting to collect as interest on the loan.

Secured Personal Loan: It is a loan that requires the borrower to pledge assets as security or collateral

Unsecured Personal Loan: It is a loan that does not require the borrower to pledge any asset as collateral.

Source: BankBazaar, Inc42 Plus

© Inc42 Media | not for distribution 51
Methodology
The report outlines a comprehensive study on the digital lending market in India. The information provided in the report
is taken from both secondary and primary sources. Virtual calls with industry stakeholders were conducted to formulate
a better understanding of the sector.

The report also contains a financial analysis section which maps the financial performance of lending tech startups in
India. A sample set of 31 most funded startups is taken which make more than 89% of the total funding between 2014 to
Q3 2020.

© Inc42 Media | not for distribution 52

Bibliography
Reserve Bank Of India

Employees' Provident Fund Organisation

https://image-src.bcg.com/Images/BCG-Digital-Lending-Report_tcm9-197622.pdf

https://www.pwc.in/assets/pdfs/consulting/financial-services/fintech/publications/a-wider-circle-digital-lending-and-
the-changing-landscape-of-financial-inclusion.pdf

https://bfsi.economictimes.indiatimes.com/news/policy/rbi-sets-average-base-rate-of-8-67-for-nbfcs-mfis/74910626

https://sidbi.in/AnnualReport201819/pdf/SIDBI%20AR_English_Part_2.pdf

https://pib.gov.in/PressReleaseIframePage.aspx?PRID=1601273#:~:text=Survey%20notes%20that%20grassroots%
20entrepreneurship,wealth%20creation%20at%20the%20grassroots.

© Inc42 Media | not for distribution 53

www.inc42.com
Inc42 is a leading Indian media and information platform, known for its end-to-end coverage of the Indian startup ecosystem. We work with the
mission to empower, connect & grow the Indian Startup Ecosystem by providing a deep understanding of the startup economy through data-backed
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Disclaimer
The data provided in this report has been obtained from public and private sources. We have made every attempt to ensure that the
information presented in this report is accurate and free from any discrepancies. Ideope Media Pvt Ltd, the parent company of Inc42 Media
and Inc42 DataLabs, is not responsible for any inaccuracy in the information presented or for any damages caused by the use of
information provided in this report. In case of any discrepancy or errors in the data, you can contact us at editor@inc42.com and we will try
our best to update the information in the digital version of the report. We are constantly updating our database of startups. Due to new
startups from various domains being updated, previously reported deals and amounts might vary.

This report has been prepared in good faith on the basis of information available at the date of publication without any independent
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This document makes descriptive reference to trademarks that may be owned by others. The use of such trademarks herein is not an
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 PRESENTS

Lending Tech In India

The Rise Of Consumer Lending Report 2020
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