Facing cash crunch, valuation of fintech firm Lendingkart down more than 60 pc

Mumbai : Fintech firm Lendingkart is facing a cash crunch as the company's profit margin declined in recent years and its valuation has reportedly nosedived by more than 60 per cent.

According to a report, the company reported a loss of Rs 24.87 crore in the June quarter of FY 2024-25, compared to net profit of Rs 25.63 crore in the same quarter of the previous financial year (FY24).

Ahmedabad-based Lendingkart's operating margin in the first quarter of FY 2024-25 was 12.62 per cent, as against 31.62 per cent in the same quarter of the previous financial year.

However, the company's sales increased by 18.57 per cent year-on-year to Rs 272.93 crore in the June quarter of the current financial year, as per reports.

According to reports, due to a cash crunch, the company, which was valued at $350 million during its last funding round -- which was four years ago -- is now trying to raise funds at a valuation of a mere $100 million -- a valuation drop of more than 60 per cent.

After the pandemic, Lendingkart was successful in earning profit. In the financial year 2022-23, the company's profit was Rs 119 crore, but in the financial year 2023-24, the company registered a profit of only Rs 3 crore, as per its financials.

Lendingkart's financial performance has been impacted by factors such as increased cost of credit, the RBI's first loss default guarantee rule and the move towards co-lending with other lenders that negatively impacted the company's business.

According to ICRA data, Lendingkart's assets under management (AUM) stood at Rs 8,883 crore in FY 2023-24, which was earlier Rs 6,174 crore. Adopting the co-lending model helped the company increase its AUM, but it limited the company's income and profits. Due to this, the company's profits have also declined in recent years, according to reports.

The group is financed by international investors like Fullerton Financial Holding (FFH) (100 per cent subsidiary of Singapore Sovereign Fund Temasek Holdings), Bertelsmann, Mayfield India, Saama Capital, Sistema Asia, India Quotient, and others and has raised around Rs 1,050 crores of equity till date. The group recently raised Rs 200 crore in debt funding from EvolutionX Debt Capital.