Udaan in talks to sell minority stake in its NBFC arm
“The company is in early talks with consulting firm DC Advisory to assist with the process and deal structures are still being decided,” said one of the people cited above, speaking on condition of anonymity. he said. The size of the proposed stake and the potential deal value have not yet been determined.
Foreign debt players are also considering investing in NBFC entity Hiveloop Capital Pvt, according to a second person. Ltd is a part of Udaan Capital, an arm of Udaan. The unit also operates Indusage Techapp Pvt. Ltd hosts the digital lending platform.
The moves come on the heels of a larger restructuring plan as Udaan’s parent company looks to streamline costs, reduce fuel consumption and improve unit economics to free up more cash for expansion amid IPO attempts next year.
A spokesman for Udaan said: “We do not comment on market speculation.” DC Advisory did not respond MintRequests for comments from user.
Udaan Capital’s portfolio currently has approx. ₹500 crore, a third person said. The company has recorded lending transactions worth a billion dollars through its NBFC arm in the last six years, one of the sources said.
While Mint cannot independently verify the valuation of the NBFC business, the general metric used is around 2-3 times book value. It provides small short-term loans to sellers on its platform. Like most NBFCs and private debt companies, the firm can recycle capital multiple times, allowing it to build a wide trading base.
Udaan last raised $114 million in June in a Series G equity fundraising round led by existing backers M&G Investments and Lightspeed Venture Partners.
The round valued the company at around $1.8 billion, similar to a capital raise in 2023, but a notable decline from its peak valuation of $3.2 billion in 2021.
The Bengaluru-based company had outlined plans to use the new capital to expand its product offering, focusing on the fast-moving consumer goods (FMCG) and hotel, restaurant and catering (HoReCa) segments. The current product range includes electronics, home and lifestyle and pharmaceutical products.
In the B2B space, IndiaMart competes with Meesho and Flipkart Wholesale.
For the past two years, the company has been on a cost-cutting spree, including reducing its workforce, reducing burn and aggressively focusing on improving unit economics.
In June, the company announced it had reduced its EBITDA burn by 40% annually over the past three years and was on track to achieve group-level Ebitda profitability within 18 months. EBITDA, or earnings before interest, taxes, depreciation and amortization, is a measure of basic operational efficiency.
Udaan’s revenue from operations increased by 1.7% YoY in FY24. ₹5,706 crore, while losses decreased by 19% ₹1,674 crore.
Rearrange the plan
Earlier this year, Udaan received approval from the National Company Law Tribunal for a restructuring plan that would bring together its technology platform, extensive distribution network, wholesale business and logistics services under a single umbrella called Hiveloop E-Commerce. The NBFC operation is also expected to be added to this structure to simplify its operations as it prepares for an IPO next year.
Founded in 2016 by Amod Malviya, Vaibhav Gupta, Sujeet Kumar, Udaan, Hiveloop Technology Pvt. operates under its legal entity. Ltd (HTPL).
About two years later, it started NBFC operations under HCPL, where it offered collateral-free loans to provide short-term supply chain financing to small businesses and micro, small and medium enterprises (MSMEs). As of FY24, its net portfolio was: ₹359 crore.
Udaan’s NBFC arm is 65% owned by HTPL and 35% by Singapore-based Unison Private Ltd, a 100% subsidiary of Singapore-based Trustroot Internet Pvt. Ltd (TIPL).
In the last two years, the company has developed IT systems, software, credit disbursement, etc. While it remains dependent on the parent company for matters, Udaan is slowly shifting away from financing supply chain transactions on its e-commerce platform to those outside the group entity.
Transactions related to financing of unsecured supply chain loans on Udaan’s e-commerce platform accounted for approximately 7.6% of the outstanding loan portfolio as of FY24, as against 50.4% in FY22. According to rating agency Icra’s rating last year, non-Udaan transactions accounted for 63.8% of the loan portfolio as of FY24, compared to 49.6% as of March 2022.
udaan group DST Global has raised nearly $2 billion from equity and debt investors including GGV Capital, Altimeter Capital, Tencent, Lighthouse Canton, Stride Ventures and Innoven Capital.
According to IBEF estimates, India’s e-commerce sector, worth $125 billion in 2024, is expected to reach $345 billion in the next five years. As revenues rise and digital adoption increases, this has opened up new avenues in B2B, direct-to-consumer (D2C), consumer-to-consumer (C2C) and consumer-to-business (C2B) models.
