Bengaluru-based lending tech startup Capital Float has been in the news for its search for $150 Mn in funding to fuel its next stage of growth. But looks like it has also been quietly raising debt funding from a slew of investors.
It has been raising multiple rounds of debt for the past 19 months from its existing investors to fulfill working capital requirements of small and medium enterprises. According to the Ministry of Corporate Affairs filings accessed by Inc42, over the last one year, the company has raised debt through non-convertible debentures from its existing investors, including Prakash Ramchand Belani, Sunil Bodaram Luthria, Gayathri Satish and others.
Since then the company has issued Series E shares to existing investors Amazon, Sequoia India and SAIF Partners. While Amazon picked up 504.5K Series E1 CCPS worth INR 124.32 Cr in June 2018, Sequoia and SAIF together picked up 263.2K Series E1 CCPS worth INR 99.9 Lakh in August 2018. It also issues Series E shares to Creation Investments and Ribbit Capital.
The MCA filings further showed that during 2017-18, the company had raised Series D from Dinesh J Hinduja, SAIF Partners, Sequoia Capital, Aspada Investment and Creation Investments.
A company spokesperson explained, “The filing currently reflecting in the MCA records as Series E1 equity raise refers to the stock swap with investors of Walnut for the acquisition. Capital Float is a Series C funded company with regard to the equity raised till date. Our next equity raise would be Series D.”
In terms of debt funding raised, we noticed that in separate rounds in January, March, June, August, September, October and December 2018, the company raised INR 74 Cr in debt. Further in 2019, Capital Float raised debt rounds in the months of January, February, March, April, May and July the company raised INR 76 Cr debt.
The latest tranche came in July for an amount of INR 2 Cr. Excluding the INR 48 Cr debt funding from Netherlands-based Triodos Investment Management in April last year, the company has raised INR 150 Cr in these rounds.
“As one of the leading and most funded fintech NBFC in India, we constantly raise debt for onward lending. In 2019, we have raised in excess of Rs. 600crs via debt and securitization from various banks, NBFCs and family offices,” the company spokesperson said.
The filings showed that the debt has been raised to finance the growth of its loan book focussed on the small and medium enterprise lending portfolio and consumer finance companies.
Overall, the company has raised INR 200 Cr debt since January 2018. Capital Float last announced $22 Mn in a follow-on Series C funding round from Amazon Inc in April 2018. In August 2017, the startup raised $45 Mn in Series C funding led by Silicon Valley-based Ribbit Capital with participation from existing investors SAIF Partners, Sequoia India and Creation Investments.
Launched in 2013 by Gaurav Hinduja and Sashank Rishyasringa, Capital Float lends to SMEs to help them scale up. It works with ecommerce merchants, small-scale manufacturers and early-stage B2B service providers to provide flexible, short-term loans.
For the financial year 2017-18, the company reported a total revenue of INR 135.1 Cr with a net loss of INR 92.12 Cr owing to finance costs, employee costs and provisions and charge-offs.
The micro, small and medium enterprises (MSME) sector has emerged as a highly lucrative sector for credit startups. According to a report by ICRA, credit to MSMEs is expected to grow at 12-14% over the next five years.
According to DataLabs by Inc42, the total GVA (gross value added) of the Indian MSME sector by FY’20 is estimated to be $866 Bn, growing at a CAGR of 11.12%.Access to credit is especially crucial for MSMEs. Lending in this sector has mostly been dominated by informal financial entities such as money lenders. This can be attributed to the fact that nearly 40% of credit allotment to MSMEs in India is through informal channels. The market potential of digital lending is estimated to be between $80 to $100 Bn by 2023.