Temasek's Fullerton to pick up controlling stake in Lendingkart for Rs 252 cr

Harshvardhan Lunia, Founder & Managing Director of Lendingkart

MSME-focused lending platform Lendingkart announced on Friday that Fullerton Financial Holdings (FFH), a wholly owned subsidiary of Singapore’s Temasek, will acquire a controlling stake in the company following regulatory approval.

The investment will include a capital infusion of up to Rs 252 crore, allowing Lendingkart to improve its technology and expand its reach in underserved markets, the company said in a statement.

It remains unclear how much stake Fullerton will hold in Lendingkart following this acquisition, as the specific percentage is not disclosed. As of March 2024, FFH held approximately 38.16 percent of Lendingkart Technologies Private Limited (LTPL), which owns 100 percent of Lendingkart Finance Limited (LFL), the company's NBFC arm.

Founded in 2014 by Harshvardhan Lunia, the Ahmedabad-based firm offers working capital and business loans to merchants through its in-house NBFC and co-lending partnerships with other banks and NBFCs.

The platform provides unsecured loans to customers in Tier 1, 2, and 3 cities, with an average loan size of approximately Rs 7 lakh. To date, the company has raised around Rs 1,050 crore from investors, including Bertelsmann, Mayfield India, Saama Capital, Sistema Asia, and India Quotient, and claims to have disbursed over 3 lakh loans worth more than Rs 20,000 crore.

"We are excited to further deepen our partnership with FFH in what will truly be a transformative phase of our journey. This investment represents a vote of confidence in Lendingkart's ability to transform the MSME lending landscape. Our goal is to replicate FFH’s past successes in the Indian financial market," founder and managing director Harshvardhan Lunia said.

"With FFH’s backing, we aim to bring more small businesses into the formal lending ecosystem and stay true to our mission: Simplifying MSME Finance."

According to ICRA ratings, Lendingkart's Assets Under Management (AUM) grew 46 percent on-year to Rs 7,254 crore as of March 31, 2024, driven by higher loan disbursements through co-lending arrangements. The share of off-book AUM (loan via co-lending partnerships) increased to 70 percent, up from 39 percent in the previous fiscal year, with co-lending partnerships involving 25 lenders.

However, the company faced asset quality challenges in FY24, primarily due to collection issues, leading to higher credit costs. As a result, Lendingkart’s standalone net profit dropped to Rs 60 crore in FY24, down from Rs 116 crore in FY23, even though total income rose to Rs 1,146 crore from Rs 824 crore.

Credit costs increased to 3.5 percent of average managed assets, compared to 2.3 percent the previous year, and operating expenses rose to 7.4 percent from 6.4 percent to support growth.

On a consolidated basis, profit after tax was negligible at Rs 3 crore in FY24, a decline from Rs 119 crore in FY23, while total income reached Rs 1,218 crore.

Additionally, the Reserve Bank of India’s (RBI) regulations on default loss guarantees (FLDG guidelines) and scrutiny on unsecured lending in impacted operations. ICRA noted that the entire AUM represents unsecured lending, which complicates recoveries from delinquent accounts.

However, 64 percent of the AUM is covered under the CGTMSE and CGFMU schemes, which are expected to help limit net credit losses, it added.