Digital payment startup BharatPe that competes with the likes of Paytm, Google Pay, and Walmart-owned PhonePe, is set to become India’s 13th unicorn company this year as it inches closer to raising a USD 200–250 million round led by American hedge fund Tiger Global, according to local media Entrackr.
“BharatPe would be valued in the range of USD 1.8 billion to USD 2.2 billion in this new transaction,” a person privy to the matter told Entrackr.
If the deal goes through, this will be the ninth unicorn-crowning investment Tiger made in India this year. And three-year-old BharatPe will become one of the fastest companies to get the unicorn status after B2B e-commerce major Udaan and Glance, an AI-powered platform that shows media content on the locked phone screens of Android users, each spent three and two years to grow into unicorn.
On Monday, BharatPe said it has raised INR 50 crore in debt funding from Northern Arc Capital. Prior to this, in January it had received INR 200 crore (USD 26 million) in debt funding from Innoven Capital, a Temasek-backed venture debt firm, Trifecta Capital, and Alteria Capital.
From payment to cross-selling
The New Delhi-based fintech company allows physical retail stores to accept money from users via government-backed payment tool UPI (Unified Payments Interface). In 2018, when BharatPe introduced an interoperable single QR code that could be used to send and receive money using any payment app, it solved a big problem for offline retailers who had to keep track of money coming from different payment services like PhonePe, Paytm, Google Pay, and Amazon Pay. A year later, once it got thousands of offline merchants to use the platform for digital payments, it began providing them with working capital loan.
Unlike other incumbent payment players that recently shifted their focus on offline merchants to cross-sell financial products, BharatPe has always set its eyes on the B2B revenue model from the beginning. It claims to have disbursed over INR 1,600 crore (USD 217 million) to more than 200,000 merchants since the launch of the lending vertical.
“We have considerably ramped up our lending business in the last year and have set an ambitious target of facilitating disbursals of USD 1 billion to 10 lakh [one million] merchants by the end of current fiscal,” Suhail Sameer, group president, BharatPe, said in a statement.
Providing short-term working capital has become the go-to market for Indian payment companies as well as B2B e-commerce platforms such as Udaan, Jumbotail, and ShopX, among others. The formal lending channels that largely include banks make it difficult for SMEs to avail credit facility as the banks have stringent risk assessment parameters. According to a report, only 16% of SMEs in India receive formal credit. The World Bank estimates the current credit gap for SMEs in India to be at USD 380 billion—a huge market for Indian tech companies to cater to. With a sudden rise in adopting digital platforms for everyday purchases due to the pandemic, the demand for working capital is also expected to increase as small offline merchants look to digitize as well as revamp their stores to ensure they have enough stock to meet a surging online demand.