Fair Valuation of a FinTech Lending Business for a leading Indian Financial Institution

Client : An Eminent Micro Lending Business

Service Offered : Buy-side Valuation for a Transaction

Sector / Industry : Banking and Finance

Client
Objective

Our client (Client) is a leading Indian financial institution, specializing in providing debt financing to self-employed entrepreneurs, Micro, Small and Medium Enterprises (MSME) and consumers in India. The Client had successfully used technology-led models to finance MSMEs and Indian consumers in unbanked and under-penetrated segments. They planned to further penetrate the micro and small lending segment by investing in an upcoming technology-driven SME lending business (the Target) that primarily focuses on small and micro enterprises.

The Target, a Mumbai based FinTech start-up, built a strong technology platform that enables instant credit decision-making using proprietary scorecards and predictive algorithms assisted by machine learning. The Target tied up with lending institutions to provide loans through their balance sheets. Though the loans sit in the books of the partnered lending institutions, the Target conducts the entire process involved in the lifecycle of a loan from origination to collection. The Target also made an application to the Reserve Bank of India to register itself as a non-deposit accepting Non-Banking Financial Company (NBFC) to transition into an on-books lender.

The Client engaged Nexdigm to assist them in arriving at the broad valuation of the Target for their planned investment.

solution
Impact

With the post money PORI valuation forming the lower band and the post money CTM valuation forming the upper band of the valuation of the Target, we presented our findings to the Client in the form of a valuation note detailing our valuation approach, peer selection process, and valuation conclusion.

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