Gold-focused digital alternative credit platform Indiagold has raises $12 Mn. PayU, the payments and fintech business of Prosus, and Alpha Wave Incubation (AWI) fund, which is backed by DisruptAD and managed by Falcon Edge Capital, will lead the investment round. Other investors include Better Tomorrow Ventures, 3one4 Capital, RainmatterCapital, and existing investor, Leo Capital.
Indiagold will use the funds to scale the business and roll out operations nationally. Currently, it is operational in Delhi and Indore.
Founded by Nitin Misra and Deepak Abbot in 2020, Indiagold offers gold-backed loans, gold savings, and gold locker services to consumers. It is working towards enabling the monetization of India’s private gold reserves by offering a suite of credit, savings, and investment products.
One of the startup’s offerings, the Gold Locker, allows consumers to keep their gold in a safe locker at affordable rates and makes the process very easy too, the company stated. It also backs the customer’s gold by insurance.
Commenting on the funding, Misra and Abbot added, “India offers a large $650 Bn addressable gold loan market which is highly fragmented and currently dominated by the informal segment. Even the formal segment hasn’t adopted digital practices at scale. indiagold’s suite of financial products bridges this critical need gap by digitally transforming lending against gold.”
According to a statement by the company, the informal gold sector accounts for approximately 70% of gold loans in India. These loans address the liquidity needs of Indians without access to unsecured credit which is availed by less than 10% of the total working population. The Covid-19 pandemic has accelerated the demand for short-term, low-cost, safe, and easily accessible formal credit options like digital gold loans.
The gold-loan space in the organised market is largely dominated by traditional NBFCs such as Muthoot Finance and Manappuram Finance. Both companies primarily operate through a network of offline outlets and agents. According to a 2018 KPMG report, Muthoot and Mannapuram commanded almost 81% of the organised gold loan market. However, slowly startups such as Sequoia-Backed Rupeek and Delhi-based gold loan provider Ruptok Fintech are slowly emerging in the sector.
Recently, SBI, which is one of India’s biggest lenders by assets, reported disbursement of gold loans worth INR 209.87 Bn for Q4 FY 2020-21, a 4.7x growth. RBI also noted that the outstanding loans against gold jewellery among banks rose to INR 604.64 Bn by March 2021, a 2.25x growth. But banks can charge interest rates of about 7% to 15% so people are warming up to the idea of the formal channel.