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Falcon, Creation lead $29m round in Indian SME lending platform OfBusiness

19 Jul 2018

Photo: Reuters

OfBusiness, a technology enabled SME financing platform, has raised Rs 200 crore ($29 million) in a Series C financing round led by American private equity and venture capital firm Creation Investments and Falcon Edge, it announced on Wednesday.

Existing investors Matrix Partners India and Zodius Capital also participated in the latest round, taking the company’s total funding via equity and debt to Rs 500 crore ($73 million) till date, the company said in a statement.

Previously, the three-year-old startup had secured debt lines from Kotak, Tata Capital, RBL Bank and Northern Arc amongst other lending partners. Avendus Capital was the exclusive advisor to the current transaction.

The latest infusion of growth capital will be used by OfBusiness for continued growth, greater financial leverage and scaling a robust profitable model, the statement added.

“We are great believers in the potential of SME lending in India towards the core sectors of the economy including manufacturing and infrastructure that have high dependence on traders and distributors for working capital. With financial services partners as Creation Investments and the right cost of capital through our debt lines, we will continue to bundle innovative lending and procurement solutions to address the growing needs of SMEs in India,” said Asish Mohapatra, co-founder and CEO, OfBusiness.

Founded in 2015 by Mohapatra, Bhuvan Gupta, Chandranshu, Nitin Jain, Ruchi Kalra and Srinath Ramakkrushnan, OfBusiness is a technology-driven platform that couples lending with value added services as procurement and marketing. OfBusiness currently has operations across 25 industrial clusters in 9 hubs and is headquartered in Gurgaon.

OfBusiness also differentiates itself by adding value to an SME’s business beyond financing, through its raw material fulfilment and new opportunities platform (BidAssist), that helps them discover new growth opportunities across public and private tenders. The company claims to have demonstrated strong 10X AUM growth over last year.

Vikram Vaidyanathan, Managing Director, Matrix India, said: “OfBusiness captures the SME’s need for repetitive purchase finance with a unique business model. Their proprietary data advantage is reflected in the increasing efficacy of underwriting and support from marquee banking partners.”

OfBusiness is the brand name for Oxyzo Financial Services, a non-banking financial company (NBFC) registered with the Reserve Bank of India and its parent OFB Tech Private Ltd provides various B2B services to SMEs.

Creation Investments Capital Management, LLC is an alternative investment management company with a focus on private equity investments in microfinance institutions, SME lenders, emerging market banks, and other BOP financial services providers. The firm claimed that its portfolio companies directly serve over 10 million entrepreneurs with over $7 billion in small business loans outstanding.

Earlier in February, Creation Investments participated in the Rs 80 crore funding round of Delhi-based Fusion Microfinance. In January last year, the private equity firm invested about $20 million in Muthoot Microfin Ltd, subsidiary of diversified financial services company Muthoot Pappachan Group.

Other recent announcements in the space include UK private equity firm Actis’ $220 million investment in Indian NBFC Profectus Capital, International Finance Corporation’s proposed $150 million investment in HDB Financial Services Ltd, a non-banking financial services arm of Indian banking giant HDFC Bank Ltd, Sequoia India’s $6 million investment in Jaipur-based NBFC Finova Capital.

In a November report, CRISIL Research, India’s independent and integrated research house, forecast 11 per cent compound annual growth rate (CAGR) in lending to micro, small and medium enterprises (MSME) in India, over the next two fiscals, way faster than the ~7% growth anticipated in bank credit to India Inc.

Currently, the MSME lending market size is estimated around Rs 14 lakh crore.