SoftBank Vision Fund is in talks to lead a $100-150 million round in lending ecommerce startup OfBusiness, valuing it at over $1.5 billion, making it a unicorn in a record breaking year for startup funding and continuing the Japanese investor’s recent dealmaking spree, sources said.
OfBusiness, founded in 2015 by former McKinsey executive and venture capitalist Asish Mohapatra, lends via a non-banking finance company (NBFC) to small and medium enterprises which have a turnover between Rs 20-200 crore.
It lends by providing raw material- which the company would use the money to buy anyway- in addition to just capital and offers a credit line at an interest rate of 1.5% per month. The company claims SMEs get the best price for their raw material requirements via OfBusiness’s bidding platform. Its technology platform negotiates with more than 100 manufacturers and suppliers across India to get best guarantee prices on structural steel, polymer, paper and cement.
$1.5 billion will be nearly double OfBusiness' last valuation of $800 million when it raised $110 million led by Falcon Edge Capital two months ago. The company’s growth has been driven by its business-to-business e-commerce model in addition to its original lending model. It had a revenue of Rs 400 crore per month only from the ecommerce business, where it sells steel, cement and fabrication materials, among other things.
OfBusiness and SoftBank declined to comment on Moneycontrol’s queries.
In the current round, early investor Matrix Partners India also plans to sell a part of its stake, pocketing $30-40 million cash, although this hasn't been finalised yet. Matrix currently owns about 16-17%, sources said. Its other investors include Norwest Venture Partners and Creation Investments.
“During the pandemic, their loan book doubled and the commerce business tripled. Raw material financing from intermediaries is expensive and large cement companies don’t give credit. They also have minimum order quantities which small businesses can’t fulfill,” said a person aware of the matter, requesting anonymity.
“They have built a sizable business without burning money. They want to go public in 3 years and it can be a great outcome for SoftBank,” the person added.
OfBusiness said in April that it has a gross merchandise value (GMV) run rate of $1.5 billion and a profit before tax run rate of $20 million. Run rate means a particular month’s numbers multiplied by twelve (annualised).
OfBusiness has also raised $200 million in debt so far from its lending partners including IDFC First Bank, SBI,HDFC and Swiss firm ResponsAbility among others.
While small business lending has seen dozens of companies emerge from India- many private equity backed and some listed- selling cement and other industrial goods online has also incited investor interest in recent times. In its B2B ecommerce business, OfBusiness somewhat competes with Infra.Market, which was valued at a billion dollars earlier this year, raising $100 million from Tiger Global Management.
OfBusiness and Infra.Market target similar customers, but Business is selling larger quantities and is operating in bigger categories than Infra.market, which is running a private label to sell stone materials, concrete, and walling solutions
SoftBank, after a relatively quiet 2020 in the aftermath of the pandemic and coworking firm WeWork’s implosion is back with a bang, and has committed over a billion dollars in India just in the last quarter. It has made investments across social commerce firm Meesho, banking software startup Zeta, software firm Whatfix, Ola Electric and food delivery firm Swiggy among others. Some of these have not been announced and have been previously reported by other publications.
The Masayoshi Son-led investment firm reported a record $37 billion in profits last quarter, led by the spectacular listing of South Korean e-commerce firm Coupang. Most of these gains are in paper and not actual cash, but they signal success and aggression from the famed investor.
Early investor Matrix selling a part of its stake is also the second such sale in recent times. Moneycontrol reported on May 7 that Matrix, one of India’s largest VC firms is also selling a $75 million stake in ride-hailing firm Ola, a key move to return cash to its own investors before raising a new fund later in the year
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