Unicorn alert! Trading startup Dhan in discussions to raise $100 million at $1.5 billion valuation

The company also competes with Groww, Zerodha, Upstox and several other discount brokers.

Raise Financial Services, the company that runs investing and trading app Dhan, is in early-stage talks to raise around $100 million in a fresh round which will catapult the company’s valuation to $1.2-1.5 billion and earn it a place in the coveted unicorn club, people aware of the developments told Moneycontrol.

While the talks are in early stages, investment banking firm Avendus has been shortlisted to run the fundraising mandate, one of the people cited above said. Dhan, founded by former Paytm Money CEO Pravin Jadhav in January 2021, competes with larger rivals such as Zerodha, Groww, Angel One, among others.

The fund raising comes at a time when Indian stock markets have been touching new highs on the back of robust retail participation, even as the government and the markets regulator has raised the red flag on heightened F&O activity.

India's unicorn drought 

India has minted only three unicorns this year Porter, Krutrim and Perfios as investors continue to tread with caution after the euphoria of 2021.

This however underscores the fact that investors are still deploying capital but have become extremely selective with the kind of companies they are backing. Only a handful of new-age companies, like Zepto, Meesho and others, have raised large amounts of money this year.

For Dhan, the new round will be its largest since its inception in 2021 and even the company’s valuation will increase significantly from around $150 million to a staggering $1.2-1.5 billion.

Raise founder and CEO Pravin Jadhav declined to comment. Avendus did not respond to Moneycontrol’s queries.

Dhan dhana Dhan 

The fresh funds will be used for business needs and expansion to take on competitors. While the company already offers investing and wealth-related services, it is also foraying into financing, payments, insurance and more, as per the company website, to grab a larger market share.

The round will likely see participation from new investors and existing backers of Raise but formal negotiations are yet to begin. Beenext, Mirae Asset Venture Investments, 3one4 Capital, Rocketship.vc are some of the company’s existing investors.

When asked about what was giving the three-year-old startup the confidence in commanding such a high valuation a second source said that Raise is “currently at a revenue run rate of $100 million, or around Rs 830 crore and has a net profit margin of 40 percent. With those financials, the amount and valuation Raise is eyeing should be easily achievable."

Considering the current revenue run rate, Raise is eyeing a revenue multiple of around 12-15X.

For comparison, Angel One – the publicly listed peer – had sales of around $500 million in FY24 and has a market capitalisation of $2.3 billion which translates to a revenue multiple of around 4.5X.

The company also competes with Groww, Zerodha, Upstox and several other discount brokers.

The return of Pravin Jadhav

Prior to Dhan, Pravin Jadhav earned his spurs growing and scaling Paytm Money, the brokerage arm of the fintech giant. However he parted ways on unpleasant terms in March 2020, joining a slew of other senior leaders who had quit around that time. Since then, Paytm Money has ceded market share to its rivals and recently made leadership changes in an effort to resuscitate this business.

Differences over remuneration, including ESOPs and annual salary, had led to Jadhav’s departure from Paytm Money, a unit he built from scratch within the company. Since his exit, the relationship between the two have only turned more sour, with Jadhav taking swipes at Paytm Money on social media platforms such as X.

“Hey Paytm Money – bit funny that you are trying to poach my team at Raise Financial Services, Dhan,” Jadhav said on X (formerly Twitter) on July 28, 2022.

“Think you should step back and focus on what I left with you -- awesome product, team, business and customers. If I start making offers to your team and customers, guess - what will happen.”

The jibes did not end there.

“My child Paytm Money, today is your foundation day. Seems your guardians forgot. Other kids in your class - are Growwing fast (Groww), moving Up (Upstox), have Angels (Angel One) and adding Zeros (Zerodha) to (the) bank. Time to Raise the Bar (Raise Financial Services/Dhan), my son. You ain't going big these days, planning to go home?” Jadhav posted on X on June 2, 2021, a reference to Paytm founder Vijay Shekhar Sharma's often quoted punchline, "Go big or go home"

Since January, Paytm Money’s active client base has been on steady decline so far this year. The company had 0.8 million (8 lakh) active users in January 2024 which kept reducing each month to reach a total active client base of 0.77 million (7.7 lakh) in June, as per data available on the National Stock Exchange (NSE).

Dhan, on the other hand, saw its active client base increase from 0.38 million (3.8 lakh) in January to 0.61 million (6.1 lakh), the NSE data further showed.

Active client means the client who has traded at least once in the last 12 months.

Three-year-old Dhan competes in the aggressive discount broking space, dominated by the likes of Groww and Zerodha who have been able to amass a large user base over the years.

Like most others, even Dhan has managed to register a strong growth in a short span, with a 330 percent jump YoY. That even as many others are either stagnating or seeing a drop in their user base as competition intensifies.

In a bid to stay relevant and expand revenue streams, broking apps have been attempting to diversify their offerings for traders to reduces drop outs.

For instance, Groww has expanded into long-term investments through mutual funds, lending, and UPI payments service. Meanwhile, Angel One is working on building its fintech super app while Zerodha declared its entry into AMC business.

Even Dhan for that matter has been quick to launch mutual fund investment services on its platform, attracting long term investors.

Per the company website, it further plans to foray into lending, payments, insurance and more to grab a larger market share.