Fullerton acquires majority stake in MSME lender Lendingkart

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Fullerton Financial Holdings (FFH), a financial services firm owned by Temasek, has completed the acquisition of a majority stake in Lendingkart, an MSME-focused lending technology platform. This deal, part of Lendingkart’s Series E funding round, involves an infusion of Rs 252 crore into the company, following regulatory approval from the Reserve Bank of India (RBI). The acquisition aims to strengthen Lendingkart’s financial position, enhance its technology-driven credit underwriting, and provide better access to lower-cost funds for small businesses. Since its inception in 2014, Lendingkart has been instrumental in offering digital working capital loans to micro, small, and medium enterprises (MSMEs) that face challenges in securing credit from traditional banks. With this investment, Lendingkart plans to scale its underwriting capabilities, expand lending capacity, and increase loan disbursals to help small businesses thrive. Over the years, the fintech firm has secured Rs 1,050 crore in equity funding from investors including Bertelsmann, Mayfield India, Saama Capital, Sistema Asia, and India Quotient. The acquisition aligns with Fullerton’s broader strategy of expanding into India’s MSME lending sector, which is experiencing rapid digital adoption.

1. Understanding Lendingkart’s Business Model

1.1 Working Model and Revenue Streams
Lendingkart operates as a digital lending platform that provides working capital loans to MSMEs. The platform uses artificial intelligence (AI) and machine learning (ML) to assess borrowers’ creditworthiness, enabling quick loan approvals and disbursals. Unlike traditional banks, Lendingkart does not require collateral, making it easier for small businesses to access credit. The company earns revenue through interest on loans, processing fees, and other lending-related services.

1.2 Founders and Their Background
Lendingkart was founded in 2014 by Harshvardhan Lunia and Mukul Sachan. Lunia, an experienced banker, has a background in finance and credit underwriting, while Sachan, an IIT alumnus, specializes in data science and technology. Their combined expertise has helped Lendingkart become one of India’s leading digital lenders for MSMEs.

1.3 Products and Services
Lendingkart offers various loan products, including short-term working capital loans, credit lines, and invoice financing. Its AI-driven underwriting model assesses over 5,000 data points to evaluate a borrower’s creditworthiness. The firm has disbursed loans to more than 1.5 million MSMEs across India.

2. Fullerton’s Investment and Strategic Expansion

2.1 Details of the Acquisition
Fullerton’s Rs 252 crore investment marks a significant milestone in Lendingkart’s Series E funding round. This acquisition strengthens Lendingkart’s ability to scale operations, enhance risk assessment models, and optimize customer experience.

2.2 Why Fullerton Invested in Lendingkart
Fullerton, a subsidiary of Temasek, focuses on expanding financial inclusion across Asia. The investment in Lendingkart aligns with its vision of leveraging technology to serve underbanked MSMEs in India. With a massive $530 billion MSME financing gap, the market offers significant growth potential for digital lending platforms.

2.3 Impact on MSME Lending
This acquisition is expected to:

• Improve Lendingkart’s access to lower-cost funds.
• Enhance credit underwriting using AI and big data analytics.
• Increase loan disbursals and support more MSMEs in their growth journey.

3. Lendingkart’s Funding Journey and Market Position

3.1 Previous Fundraising Rounds
Since its inception, Lendingkart has raised Rs 1,050 crore in equity funding from investors like Bertelsmann, Mayfield India, Saama Capital, and Sistema Asia. The latest Series E funding, backed by Fullerton, further strengthens its market position.

3.2 Market Trends in MSME Lending
Digital lending is gaining traction in India, with fintech firms leveraging AI-driven credit scoring models to serve underbanked businesses. According to industry reports, the Indian digital lending market is projected to reach $515 billion by 2030, driven by increasing smartphone penetration and regulatory support.

4. Future Prospects and Industry Trends

4.1 What This Means for the Fintech Sector
Fullerton’s investment signals growing confidence in India’s fintech ecosystem. More investors are likely to explore opportunities in digital lending, especially in the MSME sector.

4.2 Potential Challenges
Despite its growth, Lendingkart faces challenges such as regulatory changes, credit risk, and competition from other digital lenders like Razorpay, Aye Finance, and NeoGrowth.

5. Learning for Startups and Entrepreneurs

5.1 Key Takeaways from Lendingkart’s Success

• Tech-Driven Innovation: Startups should leverage AI and ML to optimize credit assessment and lending processes.
• Market Focus: Addressing pain points in underbanked segments can drive rapid growth.
• Strategic Funding: Choosing the right investors helps scale operations and enhance credibility.

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