EarlySalary eyes $100 million from TPG, Norwest

Digital lending fintech EarlySalary is in the process of closing a $100 million financing round led by private equity fund TPG and Norwest Venture Partners, multiple people told ET. The investment is expected to be officially announced in the next few days, they said.

EarlySalary’s latest funding comes amid the Reserve Bank of India’s (RBI’s) new guidelines on digital lending that puts the focus back on regulated entities, giving fintechs with an active NBFC (non-banking financial company) licence an advantage.

The proposed deal “will value EarlySalary at roughly $300 million post the investment,” said another person familiar with details. The Pune-based startup owns an NBFC licence, through which it also co-lends to its customers along with partners.

EarlySalary’s cofounder Akshay Mehrotra did not comment. A Norwest spokesperson did not respond to ET’s queries until press time. A spokesperson of TPG did not comment.

Following the announcement by the banking regulator earlier this week, ET had reported on August 12 that with the RBI favouring regulated entities, fintechs will be forced to bolster their NBFCs and work towards better capitalising them, in order to participate and have more control in the risk-taking process.

The central bank on Wednesday released the first leg of the much-awaited digital lending norms, allowing loan disbursals and repayments only among borrowers and entities regulated by the banking regulator.

Further, any fee payable to a loan services provider is to be collected by the regulated entity directly from the borrower. This has made clear that the RBI’s interest lies in licensed entities which can govern such loan disbursements. “EarlySalary has been able to capitalise well on its NBFC…The current round will help raise more liquidity for them,” said a person who was aware of the functioning of the company.

Founded in 2015 by Ashish Goyal and Akshay Mehrotra, Pune-based EarlySalary provides instant loans to salaried individuals of up to Rs 5 lakh directly, which is transferred to the borrower’s bank account. The average tenures for these loans range from three to 24 months.

The startup also partners with companies to help employees receive a salary-in-advance straight to their bank accounts for issues such as medical emergencies and school fee payments.

It has over 700 corporate tie-ups, at present. The seven-year-old startup competes with other digital NBFCs and personal loan fintechs such as KreditBee, LoanTap among others.

In March 2021, KreditBee had closed its Series C funding at $145 million, which also saw participation from NewQuest Capital Partners, Motilal Oswal Private Equity, PremjiInvest, Mirae Asset Ventures, among others.

Earlier in June, the RBI had banned prepaid payment instruments (PPIs) from being loaded through credit lines, directly impacting operations of challenger card startups including Slice and Uni. EarlySalary was also impacted as it stopped customers from making any transactions on its prepaid cards. However, the card product wasn’t a major part of the company’s loan disbursements, the sources said.

EarlySalary has racked up funding of around $35 million till date and is backed by the likes of Chiratae Ventures and Eight Road Ventures. According to sources familiar with the matter, EarlySalary currently is clocking Rs 1,300 crore in loan disbursements, on an annualised basis. Monthly loan disbursements stand at roughly Rs 350 crore and it has disbursed Rs 7,500 crore of loans since inception, these people said.

For the fiscal year ended March 31, 2021, Social Worth Technologies, the parent entity which owns EarlySalary, reported a consolidated loss of Rs 18.85 crore, up 20% from the Rs 15.7 crore worth of losses reported a year ago. Total revenues also shrank by roughly 15% to Rs 88.9 crore in FY21, according to company documents sourced by research firm Tracxn.

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