Amazon and Sequoia India-backed startup Capital Float may soon add a yet-another big name to its list of marquee investors with Naspers-owned fintech company PayU looking to put in $100 Mn-$150 Mn in the online lending platform.
A media report citing sources said that PayU is looking to acquire a 25%-30% stake in Capital Float valuing it at nearly $500 Mn. The company may also look at becoming a majority stakeholder in future funding rounds.
PayU is doubling down on emerging fintech markets, and India is possibly the biggest geography for them. The company will be reportedly committing substantial capital for investments and acquisitions, particularly to build its credit and SMB lending businesses.
However, it remains unclear if this investment is a part of a larger funding round for Capital Float.
An email query sent to Capital Float didn’t elicit any response till the time of publication.
Launched in 2013 by Gaurav Hinduja and Sashank Rishyasringa, Capital Float acts as a digital financing platform that provides quick and easy capital to help businesses fund rapid growth. It works with SMEs, ecommerce merchants, small manufacturers and early-stage B2B service providers to provide flexible, short-term loans.
The company claims to have $186.52 Mn (INR 1,300 Cr) total assets under management with its 125K users. It has till date raised $117.7 Mn funding including $22 Mn from Amazon in Series C round of funding and $7.2 Mn debt investment from Netherlands-based Triodos Investment Management.
Capital Float which focuses on SMB lending sector will open a new market for PayU, which has largely focused on consumer lending in the last few years.
Earlier in October 2018, Capital Float acquired personal finance management startup Walnut for $30 Mn in a cash-and-stock deal. With this acquisition, Capital Float aimed to strengthen its new consumer-lending business and increase its total assets under management to $717.4 Mn (INR 5,000 Cr) within a year.
Some of the major competitors for Capital Float include Faircent, Kissht, Simpl, MoneyTap, and Instamojo.
The Micro, Small and Medium Enterprises (MSME) sector has emerged as a highly lucrative sector for credit startups. According to a report by ICRA, the credit to micro, small and medium enterprises (MSMEs) is expected to grow at 12-14% over the next five years.
The sector is forecasted to cross $2.4 Bn by 2020, according to KPMG and NASSCOM report. In Inc42’s Indian Tech Startup Funding Report 2018, fintech took the top spot with fintech startups raking in $1.4 Bn across 121 deals.