Premji, Mirae eye Chinese firms’ stake in fintech lender Finnov

(This story originally appeared in on Oct 27, 2020)

Billionaire philanthropist Azim Premji’s PremjiInvest and South Korea’s Mirae Asset Venture Investment, along with other investors, are in talks to pick up a significant stake in digital lender Finnov. The e-lender owns platforms like KrazyBee and KreditBee. The deal includes the firms infusing $ 30-40 million at a valuation of close to $ 200 million, said two sources briefed on the development.

In addition, the new investors are also in talks to pick up a significant amount of shares held by Chinese backers like Shunwei Capital and Kunlun, who together own 35-40% stake in the company. Other investors include smartphone maker Xiaomi and Chinese lending company Lexin.

The deal comes after increasing restrictions on Chinese investments in India and will be one of the first few transactions involving a potential exit of Chinese shareholders. “The due-diligence process has started. The idea is to clean the investors from China and make it an Indian-owned company,” said one of the sources mentioned earlier.

A spokesperson for Finnov declined to comment. PremjiInvest’s head T K Kurien and Mirae Asset’s CEO Ashish Dave also declined to comment on speculation.

PremjiInvest has backed lending companies like Shubham Housing and Aditya Birla Capital, while Mirae has invested in major startups like grocery e-tailer BigBasket and ride-hailing major Ola.

The deal is likely to be the largest funding round till now in a fintech lender in 2020, as many players saw operations come to a standstill due to Covid lockdowns and now face potential non-performing assets (NPAs). Finnov has till now raised about $ 50 million and its backers include US- and Canada-based funds as well, like Alpine Investors and Quark Ventures.

Founded in 2015, the fintech lender first started with loans to students, but now focuses on lending to young professionals for a period of 1-15 months. Its non-banking finance unit, KrazyBee, saw its total income jump close to five times in FY20 to Rs 797 crore with profits of Rs 130 crore, according to filings with rating agency ICRA., making it one of the fastest-growing lenders. But the firm has suffered in the first quarter ending June 2020, with a total income of Rs 41 crore and losses of Rs 63 crore.

But investors are betting on the fact that the company can revive its growth now like last year, when its total managed assets grew nearly 3 times to about Rs 1,606 crore, according to ICRA. “The gross portfolio reduced to Rs 473 crore as on June 30, 2020, from Rs 957 crore as on March 31, 2020 (Rs 245 crore as on March 31, 2019) due to the significantly lower incremental disbursements in Q1 FY2021….The group expects to achieve assets under management (AUM) of about Rs 1,300-1,500 crore by March 2021,” said the filing.

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