Temasek's Fullerton acquiring controlling stake in India's Lendingkart

Fullerton Financial Holdings (FFH), a subsidiary of Singapore-based Temasek, is set to acquire a controlling stake in Lendingkart, an MSME-focused digital lending platform.

The deal, which involves an infusion of Rs 252 crore, is pending regulatory approval. Lendingkart hopes the capital infusion will boost its technology capabilities and expand its reach into underserved markets across India.

FFH, which already holds a 38% stake in Lendingkart, will gain majority control through this investment, although the exact percentage of ownership has not been disclosed.

A significant cut in valuation

This new capital injection comes as Lendingkart is facing financial difficulties. Reports suggest that the company’s valuation will be significantly reduced to around $100 million, a sharp drop from its $350 million valuation in 2020.

The deal follows months of struggle for Lendingkart, which had been seeking $30-$50 million in equity funding since last year. As a result, the new investment represents a crucial step in stabilizing the company amid growing challenges in the unsecured loan market.

Lendingkart’s business model

Lendingkart, founded in 2014 by Harshvardhan Lunia, provides unsecured working capital loans to small and medium enterprises (SMEs) across Tier 1, 2, and 3 cities. It operates through its non-banking financial company (NBFC) arm, Lendingkart Finance Limited.

The company has disbursed over 3 lakh loans, totalling Rs 20,000 crore, with an average loan size of Rs 7 lakh. In recent years, Lendingkart has also expanded its co-lending partnerships with other banks and NBFCs, increasing its Assets Under Management (AUM).

However, despite revenue growth, the company has faced profitability challenges. In FY24, Lendingkart’s standalone net profit dropped to Rs 60 crore, compared to Rs 116 crore in the previous year.

The company also faced higher credit costs due to asset quality issues, as the unsecured nature of its loans made collections more difficult.

FFH’s confidence in Lendingkart’s potential

“Our investments in Lendingkart are a testament to our continued belief in the MSME opportunity in India and that well-governed, scalable franchises can bring significant value to small businesses,” said Hong Ping Yeo, CEO of FFH.

The infusion of funds is expected to help Lendingkart overcome its financial hurdles and continue its mission of providing simplified financial solutions to small businesses across the country.

“This investment represents a vote of confidence in Lendingkart's ability to transform the MSME lending landscape. Our goal is to replicate FFH’s past successes in the Indian financial market. With FFH’s backing, we aim to bring more small businesses into the formal lending ecosystem,” said Harshvardhan Lunia, founder and managing director of Lendingkart.