Nandan Nilekani, IFC, Others Fuel $36 Mn In B2B Marketplace Power2SME

Gurugram-based B2B marketplace and SME lending firm Power2SME has raised $36 Mn Series E funding. The round saw the participation of existing investors Inventus Capital Partners, Accel, Kalaari Capital and Nandan Nilekani with participation from IFC, a member of the World Bank Group. The company had raised $10 Mn (a part of Series E) earlier this month from IFC.

Prior to this, the startups had raised an undisclosed amount of funding from Infosys co-founder Nandan Nilekani and existing venture capital (VC) funds – Accel Partners, Kalaari Capital and Inventus Capital in January last year. The amount invested was estimated to be around $20 Mn (INR 140 Cr).

“Our investment in Power2SME will spur greater VC interest in the SME sector in the country and support India’s vision to become a global manufacturing hub,” said Ruchira Shukla, South Asia Regional Lead for Venture Capital at IFC, World Bank Group. She further added, “By working with SME-focused companies and partner financial institutions, we aim to improve access to finance for over one million SMEs in the next five years. Bridging the financing gap for women-owned enterprises is also a key focus for IFC’s strategy in India.”

The startup will use the recently raised funds to continue geo expansion, accelerate product growth and innovation. Apart from this it will invest in additional sales and marketing resources, and continue evaluating strategic acquisition opportunities.

Founded in 2012 by R Narayan, Power2SME aggregates raw material and product demands from small and medium businesses and places bulk orders with suppliers and manufacturers, thereby ensuring competitive prices.

Today its portfolio offering addresses challenges in raw material procurement, Finance andMaintenance, repair and operations needs. Its offerings include –

• The B2B raw materials buying club (Power2SME.com) aggregates demand from SMEs for raw materials (such as steel, polymers, yarns, chemical, etc.).
• The fintech platform  FinanSME.com connects empaneled lenders with SMEs. It helps them to procure working capital finance from banks and non-banking financial institutions for purchases on its platform.
• Its third offering is a one-stop shop addressing SME MRO needs (SMEShops.com) to meet the growing and frequent requirements of SME buyers for consumable industrial goods.

Currently, Power2SME operates out of seven offices and 14 states in India and has a current employee strength of 250.  It has a registered SME base of 50,000 SMEs. The company claims that it has witnessed a year on year growth of 2.6 times. The firm achieved profitability in November 2016.

MSMEs account for 45% of the country’s industrial output and 40% of its exports. As per reports by Ministry of Micro, Small and Medium Enterprises, there are 48.8 Mn MSMEs in India, which employ 111 Mn people. There is a critical shortage of long-term funding for the sector. Talking about the opportunity, Nandan Nilekani, co-founder and Non-exec Chairman Infosys said, “MSMEs will play a critical role in making India a manufacturing hub, and thereby make the growth process more inclusive. The opportunity for both the government and private players such as Power2SME is large and focused and continued contribution could well bridge financial inclusion for the sector.”

With banks and NBFCS servicing about $150 Bn of SME needs and unmet needs falling anywhere $20-500 Bn, SME lending has emerged as one of the deepest non-penetrated verticals in India. It is also witnessing investor interest. Earlier this month, SME lending startup Lendingkart has also raised funding to the tune of $10.9 Mn in the form of equity funds from Singapore-based Sistema Asia Fund along with current investors. In the fintech segment, Power2SME competes with Capital Float, Innoviti, Indifi, etc. On the other hand, the Power2SME B2B marketplace competes against players including Moglix, Bizongo, OfBusiness, Wholesalebox etc.