$2 Billion And Counting—Fundraising By Fintech Firms Surges In 2021
Digit Insurance. Cred. Zeta. Groww. BharatPe. CoinDCX.
These are just some of India's fintech firms that have raised fresh funding so far in 2021, often at eye-popping valuations. As the pandemic prompts a sharper pivot towards digital finance, investors are making sure they don't miss out.
Indian fintech firms have raised over $2 billion (Rs 15,000 crore) in the first six months of 2021, according to KPMG's Pulse of Fintech H121 report released on Wednesday. The fundraising in the first half of 2021 nearly matched the money raised during all of 2020, the report said.
"Given the entire focus on technology and data, fintech companies are a very attractive segment for investors," said Sanjay Doshi, partner and head of financial services advisory, KPMG in India.
Most of the investments came in over three months ended June 30, which saw about $1.4 billion (Rs 10,500 crore) in funding across 68 deals. The investments grew over three times from $461.2 million (Rs 3,459 crore) in funding across 44 deals in the corresponding quarter of 2020.
Globally, fintech investments touched $98 billion (Rs 7.35 lakh crore) across 2,456 deals in the first half of 2021, rising nearly threefold from $34.4 billion (Rs 2.58 lakh crore) across 1,731 deals in the first half of 2020, the KPMG report said.
Digital Banking Leads The Race
The investment in India's fintech market went primarily to digital banking firms that have emerged as a unique model compared to other jurisdictions in the regions, said Doshi.
"Digital banking was a big play in India. Similarly, insurtech and wealthtech are growing areas of interest in India, with payments and fintech lending continuing to find support," he said.
Some of the biggest fund-raises during the year included:
Merchant payments platform Pine Labs’ $285 million
Digital rewards platform Cred's $215 million
RazorPay's $160 million
KreditBee's $153 million
$110 million by OfBusiness
BharatPe's $108 million
The year also saw interest from mid-sized PE and VC firms towards insurtech startups, as several of them such as Turtlemint, RenewBuy, and Digit Insurance raised a little over $100 million together.
"Early fintech leaders in India have continued to expand their business models into adjacencies in order to bring their customers more value, such as payments players acquiring insurtechs," the report said.
Is Crypto Drawing Investors?
Cryptocurrency startups also managed to get in on the act despite the persisting regulatory uncertainty.
While data on the quantum of investments in cryptocurrency startups in India this year was not available, Gopal Agrawal, managing director and head-investment banking at Edelweiss Financial Services, said that venture investors have remained bullish on crypto-related startups.
"This, as the community of retail investors is growing in the Indian crypto space, and venture funds, attracted by its growing scale, are making investments in startups that are leveraging blockchain and those providing infrastructure for cryptocurrency investments," he said.
This week, Indian cryptocurrency exchange CoinDCX became the first unicorn in the space after it raised Rs 670 crore from investors led by Facebook Inc. co-founder Eduardo Saverin’s B Capital Group.
Developments in India are mirroring what is happening globally.
"Cryptocurrency and blockchain is exploding globally," Anton Ruddenklau global fintech co-leader and partner, who also heads financial services advisory at KPMG in Singapore, said in the report. "Digital currencies and virtual assets are a big, big topic of conversation. I think for the rest of this year at least, crypto will be a very hot ticket for investors."
Valuations And Exits
Through their latest rounds of fundraising, fintech startups in India have seen valuations rise sharply.
This, said Agrawal of Edelweiss Financial Services, is mainly as early fintech entrants have grown considerably in size and are raising later stages of funding, "Besides, the market has been quite conducive for fintech firms that are looking to go public, further improving their valuation metrics," Agrawal said.
Avenues for public market and secondary exits for PE and VC investors are expanding in India, said Doshi.
Exits in India are going to increase, both in terms of IPOs and in terms of acquisitions. On the M&A front, fintechs could be targeted by banks, larger fintechs or even a fintech services conglomerate.Sanjay Doshi, Partner and Head of Financial Services Advisory, KPMG India
In terms of investors, Agrawal said the market is seeing a greater number of private equity and venture capital investors betting on Indian fintech firms, as opposed to select VC funds earlier. "The interest has also been higher on the strategic side, as financial institutions and banks hunt for suitable acquisition opportunities among new-age fintech firms to expand their digital banking suite of services."