Switzerland-based IT security solutions EST Group has said it is bullish on Indian startups and is looking to invest $250 Mn (INR 1770 Cr) into Indian startups, particularly in the fintech sector.
The company said it will invest in Indian startups that are focussed on fintech applications and in related business models. Sindhu Bhaskar, director and CEO, EST Group said that when markets are in a slowdown, it presents new opportunities for investors. “India’s largest asset is its intelligent and educated human capital and it is important to use these resources by allowing them to innovate in a problem area and then giving access to capital,” he added.
He said that EST Group is planning to invest in fintech applications and business models that will plug into its larger vision of building an aggregated platform for capital that will allocate impactfully to help growth sectors in our economy.
Sajid Jamal, who is heading the venture fund of EST Group, said capital is not scarce but scattered and EST’s vision is to aggregate unused capital by investing in technology and then use AI algorithms to find creditworthy SMEs, startups and agricultural businesses. “For this, we have decided not to start from scratch but to invest in existing platforms and then connect this platform to one larger ecosystem platform that will help in enhancing growth in the economy by solving grassroots problems of the economy,” he added.
In the case of the fintech sector in India, the addressable market has been widened due to the network effect created on the consumer side by discounts and cashback along with the widespread awareness thanks to the forced demonetisation of INR 500 and INR 1,000 currency notes on November 2016.
Funds and VCs from all corners of the world are ready to invest billions into the fintech sector. According to the Global Fintech Report Q1 2019, more than 1 Mn borrowers and 2 Mn lenders have transacted with lending platforms, with the overall exposure remaining at INR 350 Cr. Further, between 2015 and Q1 2019, the total investment in Indian fintech startups was $7.62 Bn, out of which 25.49% ($1.94 Bn) was for lending tech startups, according to DataLabs by Inc42.
India’s digital lending market has the potential to become a $1 Tn (INR 71 Lakh Cr) opportunity in the next five years, according to a 2018 BCG report. Of this, personal lending is estimated to grow to a $50 Bn market, growing at a rate of 30% every year.
Fintech companies such as Paytm, PolicyBazaar, BillDesk, PhonePe and Pine Labs have already attained unicorn status. With entrepreneurs trying to bring innovation in niche areas, the sub-sectors are still evolving gradually. At the same time, the Indian government is working on refining the rules for the fintech sector with initiatives such as a regulatory sandbox for innovation testing.