True Balance, an RBI authorised fintech app operated by Balancehero India Private Limited, the wholly owned subsidiary of Balancehero Co. Ltd. Korea, today announced $10 Mn in debt funding from a group of investors.
The investment has come from Northern Arc, a Chennai based non-banking finance company (NBFC) that provides access to debt for under-banked individuals and businesses, and other investors from India and Korea for its lending arm -True Credits (NBFC) to support the company’s growth.
Unlike equity financing, where funds are raised in exchange for a stake in the company, debt funds lend money expecting to be paid back after a certain period of time. In some cases, debt financing may be accompanied by equity financing as well.
The Seoul & Gurugram headquartered fintech firm claims to have disbursed loans worth over $30 Mn this financial year. The entity had previously raised series D funding of $28 Mn from SoftBank Ventures Asia, Line Ventures Corporation, D3 Jubilee Partners, and a host of other global investors towards the end in November 2020.
True Balance has aggressively expanded its portfolio to low-income groups. The company’s loan book has grown over manifolds since April 2020, especially across two key products -Cash Loans and Level Up Loans. With these key products, the company will be catering to customers within the monthly income bracket of INR 10,000- INR 45,000. Customers in this income bracket can avail loans from INR 5,000 to INR 50,000 from the app.
Victor Choi, CEO, True Balance said, “Our focus is to be a company that enables ‘Finance for all’ especially those uncredited users on our platform, based on our internal alternative credit scoring system.” Choi also mentioned that this round of funding would be used to fuel the company’s India expansion plans and launch of newer loan products. The company uses their internal alternative credit scoring system (ACS), machine learning based underwriting models to support and fund new to credit (NTC) and low credit users.
The debt fund investment will largely help the NBFC subsidiary company to achieve breakeven for its business and deliver profitability by Q3 of FY 2021 with more funding expected during the year.
Vishal Bhatia, Chief Financial Officer, True Balance said, “This round of funding will be fortifying the collective effort by start-ups such as us and the government to make India a stronger economy as we move forward towards growth. We are also expecting additional funding of $40 Mn, this financial year.”
Amid the Covid-19 pandemic, venture debt became a preferred option for Indian startups looking to tide over the crisis without divesting equity in the process, especially given that investors chased higher equity at a lower valuation in the first half of 2020.
Venture debt is usually raised when the existing venture capital base has reached a certain level of maturity. With the VC money flowing in steadily over the years and reaching $70 Bn across 5,985 deals between 2014 and 2020, the Indian startup ecosystem has reached a certain degree of maturity and therefore venture debt has come into play.
Between 2019-20 there has been a 2x surge in total venture debt funding in Indian startups from $217 Mn to $427 Mn. This clearly underlines the growing prominence for venture debt during pandemic times and given this, 2020 was by far the best year for venture debt funding in India.