Fintechs in India have raked in the moolah in 2021, with at least 11 new unicorns, and late-stage funding deals happening at 2 to 5X valuations.
Fintech funding has soared 64.71 per cent in 2021 vis-a-vis 2020.
As of December 8, according to data from Tracxn, the current calendar year saw $8.02 billion in fintech funding across 363 rounds as compared to $2.83 billion over 296 rounds in 2020.
Influx likely to continue
Despite Paytm’s lacklustere listing, the momentum of capital influx into the fintech sector is expected to continue in 2022, investors said.
“The listing is unlikely to dampen investors’ spirit and outlook for the industry as private market players had expected a tepid response to Paytm listing and had already factored in the scenario,” a source seeking anonymity told BusinessLine.
Ashish Sharma, MD & CEO, InnoVen Capital, believes valuations, too, have particularly gone up for growth/late-stage companies, some of which have done two to three funding rounds at significant mark-ups.
Higher valuation
“While there are many reasons, including the size of the opportunity and the ability of start-ups to scale up faster, but the primary reason has been the flood of liquidity that has entered the market, which has led to more money chasing the same 10 to 15 start-ups, resulting in higher valuation,” he said.
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A case in point is recent unicorn, Slice, which was valued around $200 million earlier this year, saw its valuation jump over 5X to over a billion dollars in November after raising $220 million in a round led by Tiger Global and Insight partners.
Investment platform Groww’s valuation increased 3X in October following a fund raise of $251 million in a growth round led by Iconiq Growth and existing investors. This came within six months of raising funds at nearly $1 billion valuation.
Other mature unicorns such as Razorpay and Cred, to name a few, have continued to raise funds doubling valuations this year. Sources told BusinessLine, more major fintech funding announcements are likely to happen in early 2022 as several prominent names and existing unicorns are in talks, riding the momentum.
Recently, Japanese investment firm SoftBank said they will be looking at more fintech bets in India now that Paytm and PolicyBazaar have got listed.
Why the funding craze?
Investors unanimously attribute it to the large scale and rapid adoption of digital payments during the ongoing pandemic, and how regulators and policy makers, too, took interest in the space.
“India is the fastest growing fintech market and is driven by increased digital adoption, technological advancements, increasing collaboration between banks and fintechs, strong talent pool, regulatory initiatives and funding environment, among others,” Apoorva Sharma, Partner, Stride Ventures, said.
Pranav Pai, Founder and CIO, 3one4capital, opined that an acceleration of adoption of digital financial products and services in the country has given much support to the thesis that India will have several large fintech value creators. 2021 also saw more capital being made available to these unique innovation engines, he added.
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Within fintech, funding has been well diversified across categories and use cases, be it payments/merchant lending (PineLabs, BharatPe, RazorPay, PhonePe ), consumer lending/cards/ BNPL (Slice, Krazybee,Cred), challenger brokerage platforms (Groww, Upstox), SME lending (Ofbusiness) or InsuranceTech (PolicyBazaar, Digit, Acko), explained Sharma of InnoVen Capital.
Stride Ventures’ Sharma said, “Digital consumer lending has been the most funded segment and continues to rise on back of alternative data sources, low turnaround times, minimal operational requirements and presence of open architecture like GSTN, account aggregators.”
