Udaan in talks to sell minority stake in its NBFC arm

“The company is in early talks with advisory firm DC Advisory to help with the process, and the deal structures are still being decided,” one of the people cited above said on the condition of anonymity. The size of the stake on offer and the potential deal value are yet to be determined.

According to a second person, foreign debt players are also evaluating an investment in the NBFC entity called Hiveloop Capital Pvt. Ltd, which is part of Udaan Capital, an arm of Udaan. The unit also operates Indusage Techapp Pvt. Ltd, which hosts the digital lending platform.

The moves come on the back of a larger restructuring plan as Udaan’s parent looks to streamline costs, reduce burn and improve unit economics to free up more cash for expansion amid attempts for a public listing next year.

“We do not comment on market speculations,” a spokesperson for Udaan said. DC Advisory did not respond to Mint’s requests for a comment.

Udaan Capital’s portfolio currently stands at about ₹500 crore, a third person said. In the last six years, the company has recorded lending transactions worth a billion dollars through its NBFC arm, one of the persons said.

Though Mint could not independently verify the valuation of the NBFC business, a general metric used is around 2-3 times the book value. It gives short-tenor small loans to the vendors on its platform. Like most NBFCs and private debt firms, the firm is able to recycle the capital multiple times, enabling it to build large transaction base.

Udaan last raised $114 million in a Series G equity fundraising round led by existing backers M&G Investments and Lightspeed Venture Partners in June.

The round valued the company at about $1.8 billion, similar to when it raised capital 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 fresh capital to expand its range of products, with a focus on the fast-moving consumer goods (FMCG) and hotel, restaurant, and catering (HoReCa) segments. Its existing range of products include electronics, home & lifestyle, and pharmaceuticals.

It competes with IndiaMart, Meesho, and Flipkart Wholesale in the B2B space.

Over the last two years, the company has been on a cost-cutting spree, including trimming its workforce, reducing burn, and aggressively focusing on improving its unit economics.

In June, the company said it cut its Ebitda burn by 40% annually over the last three years and is on track to achieve Ebitda profitability at the group level in 18 months. Ebitda, or earnings before interest, taxes, depreciation and amortization, is a measure of core operational efficiency.

In FY24, Udaan’s revenue from operations grew 1.7% year-on-year to ₹5,706 crore, while losses fell 19% to ₹1,674 crore.

Recast plan

Earlier this year, Udaan received approval from the National Company Law Tribunal for a restructuring plan that will combine its technology platform, extensive distribution network, wholesale trading, and logistics services under a single umbrella called Hiveloop E-Commerce. Its NBFC operation is also expected to be added into 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 operates under the legal entity Hiveloop Technology Pvt. Ltd (HTPL).

Around two years later, it commenced its NBFC operations under HCPL where it offered unsecured loans to provide short-term supply chain financing to small businesses and micro, small and medium enterprises (MSMEs). As of FY24, it had a net portfolio of ₹359 crore.

Udaan’s NBFC arm is 65% owned by HTPL and 35% by Singapore-based Unison Private Ltd, which is a 100% subsidiary of Singapore-based entity Trustroot Internet Pvt. Ltd (TIPL).

Over the last two years, the company has been gradually pivoting from financing supply chain transactions on the Udaan e-commerce platform to those outside the group entity, although it continues to be dependent on the parent company for IT systems, software, loan origination, etc.

Transactions on financing unsecured supply chain loans on Udaan’s e-commerce platform stood at about 7.6% of the loan portfolio outstanding as of FY24 versus 50.4% in FY22. Off-Udaan transactions were 63.8% of the loan portfolio as of FY24 compared to 49.6% as of March 2022, according to a note by rating agency Icra last year.

Udaan group has raised nearly $2 billion from equity and debt investors, including DST Global, GGV Capital, Altimeter Capital, Tencent, Lighthouse Canton, Stride Ventures and Innoven Capital.

India’s e-commerce industry, valued at $125 billion in 2024, is projected to grow to $ 345 billion over the next five years, according to IBEF estimates. With rising incomes and growing digital adoption, this has opened up new avenues across B2B, direct-to-consumer (D2C), consumer-to-consumer (C2C), and consumer-to-business (C2B) models.