Temasek’s Fullerton to Take Control of India’s Lendingkart: What It Means for MSMEs

Temasek’s Fullerton Financial Holdings (FFH) is making a significant move in India by acquiring a controlling stake in Lendingkart, a digital lending platform focused on small and medium enterprises (SMEs). Here’s a closer look at the deal and its implications.

What’s Happening?

Fullerton Financial is set to invest ₹252 crore (approximately $30 million) in Lendingkart, pending regulatory approval. This investment will give FFH majority control, as they currently own 38% of the company. However, the exact ownership percentage after the deal hasn’t been revealed.

A Dramatic Valuation Drop

This investment comes at a critical time for Lendingkart, which has been facing financial challenges. Reports indicate that its valuation has plummeted from $350 million in 2020 to around $100 million now. The company has been trying to secure $30-$50 million in funding since last year, making this capital infusion essential for its survival.

Lendingkart’s Business Model

Founded in 2014 by Harshvardhan Lunia, Lendingkart specializes in providing unsecured working capital loans to SMEs across various Indian cities. Through its non-banking financial company (NBFC) arm, Lendingkart Finance Limited, it has disbursed over 300,000 loans totaling ₹20,000 crore, with an average loan size of ₹7 lakh.

Despite a growing customer base, Lendingkart has struggled with profitability. In FY24, the company reported a net profit of ₹60 crore, down from ₹116 crore the previous year, largely due to rising credit costs and asset quality issues.

FFH’s Confidence in the Future

Hong Ping Yeo, CEO of FFH, expressed strong belief in Lendingkart’s potential, stating, “Our investments are a testament to the MSME opportunity in India.” He emphasized that well-managed businesses can create significant value for small enterprises.

Harshvardhan Lunia echoed this sentiment, highlighting that FFH’s backing will help Lendingkart transform the lending landscape for MSMEs in India and support more small businesses in accessing finance.

Conclusion

The acquisition by Temasek’s Fullerton marks a pivotal moment for Lendingkart, offering a lifeline as it navigates financial hurdles. With renewed support, the company aims to strengthen its mission of providing accessible financial solutions to India’s small businesses.