Google-backed online lending marketplace Progcap registers 25x rise in operating revenue in two Covid years

Representative image for digital lending

Google-backed Progcap, a startup providing working capital loans to small retailers, reported a 25x increase in operating revenue over the two Covid years (April 2020-March 2022), demonstrating the country's rapid adoption of digital lending services due to pandemic-induced stay-at-home restrictions.

Progcap reported operating revenue of Rs 26.4 crore for FY22 (2021-22), a more than fourfold increase over FY21 (2020-21), when it generated Rs 5.9 crore from operations, according to the company's regulatory filings with the Ministry of Corporate Affairs (MCA). The company's operating revenue in FY20 was just Rs 90 lakhs.

To be sure, it took nearly three full fiscal years for the six-year-old startup to reach the Rs 1-crore operating revenue mark, highlighting the slow and low penetration of online lending services in the country, which has grown manifold since the outbreak of the pandemic in March 2020, which forced governments to lock millions of people indoors.

The digital lending sector is becoming a hotbed for investment activity, with investors flocking to back startups in this space. In March, Moneycontrol reported that lending-focused startups dominated private equity and venture capital funding in 2023, as investors shied away from pure technology-oriented deals amid a worsening funding winter.

PhonePe, currently India’s most-valued fintech startup, is also launching digital lending on its platform and has already begun pilots for the same, its chief Sameer Nigam told Moneycontrol.

Progcap, however, reported a widening loss of Rs 24.1 crore for the year ended March 2022, owing to a fourfold increase in employee benefit costs. In FY22, the company spent nearly Rs 44 crore on employees, up from Rs 11 crore the previous year.

Progcap's biggest expense categories, aside from employee benefits, were processing fees and legal and professional fees, which totalled Rs 6 crore. Progcap spent just over Rs 50 lakh on advertising and promotions, which is a significant expenditure for fintech companies, particularly those involved in online lending. In February, Moneycontrol reported how India’s fintech unicorns slipped into deeper losses due to aggressive spending on advertising and marketing.

Founded in 2017 by former XLRI Jamshedpur alumni Pallavi Shrivastava and Himanshu Chandra, Progcap lends to businesses that do not otherwise have formal credit records or history. Progcap facilitates the loan, while the actual lending is done by its partners-Muthoot Finance, Credit Saison and Star Finserv. The company competes with other MSME fintech lenders such as Kissht, Indifi Technologies, Lendingkart, Rupifi, etc.

Progcap has raised more than $110 million in funding to date and is currently valued at close to $600 million. It last raised funds in June 2022, when Google participated in its funding round along with its other existing investors like Tiger Global and Sequoia Capital. According to data on Tracxn, Sequoia Capital holds more than 30 percent of Progcap, while Tiger Global holds nearly 17 percent of the company.

In FY22, Progcap reached its goal of recording annualised disbursals of $1 billion, a growth of 4x year on year, the company had said during its last fundraise.