Lendingkart , a prominent MSME-focused lending platform, is reportedly negotiating a significant valuation cut with its existing investor, Fullerton Financial Holdings (FFH), due to a cash crisis and challenges in the unsecured loan market. According to a report in Economic Times, "Lendingkart is staring at a massive valuation cut amid a cash crisis that has hit the MSME-focused lending platform over the past few months due to stress in the unsecured loan market." The ET report quotes people familiar with the development said.
More than $250 million fall in valuation
The company, which was valued at $350 million during its last funding round four years ago, is now seeking a new funding deal at a much lower valuation of $100 million. Fullerton, which already holds a substantial stake in Lendingkart, is considering increasing its ownership to become the majority shareholder.
Despite a successful turnaround following the pandemic, Lendingkart has faced difficulties in recent months. The company's financial performance has been impacted by factors such as increased credit costs, the Reserve Bank of India 's regulations on first loss default guarantees, and a shift towards co-lending arrangements with other lenders.
What's hurting Lendingkart
The co-lending model, while helping Lendingkart expand its assets under management, has also limited its revenue potential and profitability. The company's net profit has declined in recent years, and it is now seeking additional equity capital to strengthen its financial position.
Investors in the fintech lending sector are becoming more cautious, favoring companies with strong track records in traditional lending and a demonstrated ability to navigate market challenges. Lendingkart's reliance on partner lenders and its recent financial performance may be hindering its ability to attract new investors.
As Lendingkart faces these challenges, other fintech lenders, such as Flexiloans, Aye Finance, and Indifi, have managed to secure funding from global investors. The overall fintech funding landscape has slowed down, but there are still opportunities for well-positioned companies to raise capital.
More than $250 million fall in valuation
The company, which was valued at $350 million during its last funding round four years ago, is now seeking a new funding deal at a much lower valuation of $100 million. Fullerton, which already holds a substantial stake in Lendingkart, is considering increasing its ownership to become the majority shareholder.
Despite a successful turnaround following the pandemic, Lendingkart has faced difficulties in recent months. The company's financial performance has been impacted by factors such as increased credit costs, the Reserve Bank of India 's regulations on first loss default guarantees, and a shift towards co-lending arrangements with other lenders.
What's hurting Lendingkart
The co-lending model, while helping Lendingkart expand its assets under management, has also limited its revenue potential and profitability. The company's net profit has declined in recent years, and it is now seeking additional equity capital to strengthen its financial position.
Investors in the fintech lending sector are becoming more cautious, favoring companies with strong track records in traditional lending and a demonstrated ability to navigate market challenges. Lendingkart's reliance on partner lenders and its recent financial performance may be hindering its ability to attract new investors.
As Lendingkart faces these challenges, other fintech lenders, such as Flexiloans, Aye Finance, and Indifi, have managed to secure funding from global investors. The overall fintech funding landscape has slowed down, but there are still opportunities for well-positioned companies to raise capital.
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