Debt marketplace startup CredAvenue has made its first acquisition just four months after raising one of the largest Series A equity rounds in the startup space of $90 million.
The startup has acquired a 75.1 percent stake in Mumbai-based Spocto Solutions, an artificial intelligence and machine learning-powered debt recovery platform to extend an additional feature to its client banks and institutions besides providing a marketplace.
In an interview with Moneycontrol, Gaurav Kumar, founder and CEO of CredAvenue said that the acquisition was made at a valuation of $46 to $56 million (Rs 350-450 crore).
CredAvenue’s platform essentially serves as an infrastructure for enterprises and lenders to discover and execute debt transactions. Secondly, the platform also provides underwriting services to banks and NBFCs for loans that originate on CredAvenue. With this acquisition, the banks and NBFCs will also be able to execute debt collection on the same platform.
“Spocto is the largest digital collection platform in India and also works with the top five banks in the Middle East. The founders too have a good blend of experience in collection and technology. Most of the banks on our platform were looking at us adding this feature,” Kumar said.
Spocto was founded in 2016 by former General Electric executives Sumeet Srivastava and Puja Srivastava and has assets under management (AUM) worth $50 billion across 37 clients.
CredAvenue plans to acquire the balance 25 percent stake in the coming five years and also plans to invest a further $80 to 120 million in Spocto in the coming years, Kumar added.
Currently, the platform has five offerings. The first is a co-lending platform for banks and Non-Banking Financial Institutions to discover and provide joint loans. Secondly, enterprises looking to seek loans can do so via the platform and it helps manage repayments too. The third, and the one that investors are most bullish about, is a bond marketplace, to help enterprises and lenders access primary and secondary bonds.
Its fourth platform helps secure working capital and cash flow requirements for supply-chain finance. Lastly, its Pools product provides structured finance options like pass-through certificates and securitisations.
Investors have been bullish on CredAvenue’s business because it makes it easier for firms to access the debt market to raise funds, secure loans and for banks and NBFCs to lend and track the loans. This offering is seen as one of a kind by investors and the right fit for a debt-starved country like India.
In 2020, India’s credit-to-Gross Domestic Product (GDP) ratio stood at around 56 percent. But, according to the data from the Bank of International Settlements (BIS), that number is half of the G20 average. With the ratio being much lower than its peers, India has a long way to go in increasing access to credit.
With its last round raised at a valuation of $410 million, CredAvenue is expected to join the unicorn club i.e. attain a valuation of over $1 billion with its next fundraise.CredAvenue also offers portfolio management and monitoring services to borrowers and lenders. The platform has over 2300 corporates and 750 lenders as clients and has facilitated debt volumes of over Rs 90,000 crore.