Mumbai-based non-banking financial company (NBFC) NeoGrowth Credit Pvt Ltd has raised Rs 10 crore ($1.62 million) from Aspada Investment Company, as per a statement.
NeoGrowth Credit is a non-deposit taking NBFC involved in the merchant cash advance business. It was founded by serial entrepreneurs Dhruv Khaitan and Piyush Khaitan after they sold their transaction processing firm, Venture Infotek in mid-2010.
“Small businesses are the backbone of the Indian economy, yet there are hundreds of thousands of small merchants in India that are excluded from formal credit and banking channels. Extending transparent, timely, and scalable financial offerings to this segment will help spur business creation in a large market that has had to largely rely on informal sources of capital.” said Piyush Khaitan, co-founder and MD of NeoGrowth Credit.
In mid 2013, Omidyar Network India Advisors Pvt Ltd had invested Rs 17 crore to pick 29 per cent stake in NeoGrowth Credit.
NeoGrowth Credit’s founders see a substantial portion of their current business model associated with the point-of-sale (PoS) machines. The firm extends financing if a substantial portion of borrowers’ sales happens on the PoS machine. It works unlike a fixed EMI method offered by banks and other financial services firms.
The NBFC claims its product does away with the usual lengthy loan appraisal procedures which comes with a fixed EMI system and most importantly, removes the necessity of the merchant to visit the lender’s location at every stage.
“NeoGrowth brings an outstanding team and novel approach in what is a large, vastly underserved, and rapidly growing market. The credit provided by NeoGrowth will allow small firms to manage working capital, account for inventory fluctuations and seasonality, hire additional employees, and stock new merchandise. We view supporting the small business (SME) segment as a critical priority area and one that is necessary to sustain India’s long-term growth trajectory” said Thomas Hyland, partner of Aspada.
Aspada, led by Kartik Srivatsa and Thomas Hyland, provides early-stage risk capital to businesses that help expand market access, improve livelihood and create large-scale employment opportunities in underserved communities. It makes both equity and debt-like self-liquidating investments and backs agricultural supply chain companies in an effort to support small farmers. Its target sectors include healthcare delivery, agricultural supply chains, education, logistics and financial services.
In January this year, Aspada invested Rs 10 crore in supply chain solutions firm ThinkLink. The firm announced its first investment last April in an end-to-end fresh vegetable supply chain firm Lawrencedale Agro Processing, which operates in the Nilgiri belt in southern India.
In April, Aspada also raised $10 million from US-based Soros Economic Development Fund (SEDF).
Earlier, SEDF had created $17 million SONG Fund, along with Omidyar Network, Google and Indian School of Business. Aspada also advises the portfolio of SONG Fund.
(Edited by Joby Puthuparampil Johnson)