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Wed 5 Dec 2018 12:50 PM

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Indian investors back fintech with $2bn investment

E-commerce sector topped the list in terms of investor funding in India

Indian investors back fintech with $2bn investment
Flipkart was acquired by Walmart in a $16 billion corporate deal earlier this year.

The fintech sector has emerged as the most preferred sector for investors in India this year, who have pumped in a little over $2 billion in funding in a clutch of companies in the sector.

The sector also saw the total number of funding deals this year reaching 132 (as of last week), up from the 103 deals in 2017, according to investment tracking firm YourStory.

Last year, the e-commerce sector topped the list in terms of investor funding in India, led by a series of mega funding rounds by domestic e-commerce major Flipkart.

Flipkart was acquired by Walmart in a $16 billion corporate deal earlier this year.

Largescale corporate M&A deals are not part of the funding deals list prepared by the tracking firm.

This year’s total funding, however, was 13 percent lower than last year’s $2.4 billion funding received by companies in the fintech sector.

Paytm led the table of companies which got top dollars in funding this year, with a $300 million fund infusion by global investment guru Warren Buffett-led Berkshire Hathaway.

Last year also, Paytm topped the list in the Indian fintech sector, with a mega $1.14 billion private equity deal with SoftBank.

The top 10 deals by value in fintech accounted for 60 percent of total funding raised this year, reflecting the overall trend in investment in India that investors are taking pole positions in companies with a proven track record and the ability to scale.

Two of India’s newest unicorns also feature on this list. Insurance aggregator PolicyBazaar raised $238 million from Softbank in June at a valuation of a little more than $1 billion. Singapore-based Temasek, along with PayPal, invested $125 million in payments service provider Pine Labs, also taking its valuation over $1 billion.

"There seems to be a trend of investors cherry picking a particular sector for a year or two for funding. It seems to be a self fulfulling trend as, while investors show preference for a particular sector, promoters also come up with new companies in this sector to take advantage of the investors' preference for the sector," Harminder Sahni, MD of Wazir Advisors, told Arabian Business.

A mix of payments, lending and insurance start-ups figured in the top 10 list this year, with tax service provider Cleartax among them with a $50 million Series B round funding.

Significantly, the number of deals amounting to $100 million and above rose to 5 this year, as against three such deals in 2017.

Lending firms in the fintech sector came across as the most active category, raising a total of $953.03 million, accounting for  46 percent of the total deal value this, double than that in 2017.

With 69 deals, companies in this segment accounted for more than half the number of deals in the sector, across stages, against 47 percent last year, when payment companies dominated the charts, according to the deal tracking firm report.

This year also saw the entry of CapitalG, Google’s investment arm, to the Indian market, with an initial investment in lending start-up Aye Finance.

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