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BharatPe raises debt funding as part of its goal to become a digital bank

BharatPe has raised $20 million (₹139 crore) through a debt funding round from Alteria Capital and ICICI Bank. The merchant-focused loan and payments app platform has raised around ₹200 crore in debt funding till date, as it aims to scale its lending business in the coming months, it said in a press release. The company is also in the race to take over the beleaguered Punjab and Maharashtra Cooperative Bank (PMC) through a joint-venture partnership with the Centrum Group.

As part of this funding round Alteria Capital pumped in ₹90 crore, while ICICI Bank provided ₹49 crore. This debt will go towards BharatPe’s lending operations. Previously, the company had raised ₹60 crore in debt funds from Innoven Capital. The company has been disbursing ₹200 crore worth of loans to its merchants every month and aims to disburse ₹1,000 crore worth of loans to its merchants in FY21.

“We have already disbursed loans to more to 1 lakh merchants and aim to scale this up by 8-10x and enable credit for a million (10 lakh) kirana store owners in 2021,” said Suhail Sameer, Group President, BharatPe.

“We aim to become a Digital Bank that is the one-stop destination for merchants for all kinds of financial services and this tranche of funds will get things rolling,” said Ashneer Grover, co-founder and chief executive officer, BharatPe. “We have committed ourselves to have $700 million of loans to small merchants and kirana store owners by March 2023 and are hoping to on-board more institutional debt partners in the near future,” he said in a statement.

The company has over 5 million merchants and has processed an average of over 6 crore transactions on the Unified Payments Interface a month. BharatPe’s was recently valued at $500 million and has a user base of over 5 million merchants. It has a lending platform, which has grown significantly over the past year, from disbursing around ₹10-12 crores a month in January to ₹100 crores in October.

On the PMC Bank bid

While the company has struggled to get a lending license from the Reserve Bank of India (RBI), if its bid alongside the Centrum Group for PMC Bank is accepted by the regulator, it will leapfrog BharatPe’s journey from a payments app to a bank overnight.

In September 2019, it was revealed that PMC Bank had a ₹6,500 crore hole in its balance sheet, around 73% of its loan book. While the RBI swooped in to introduce restrictions on withdrawals and supersede the banks’ board by appointing an administrator, for nearly two years the banks’ depositors have been struggling to move on due to the regulatory restrictions. As of March 2020, PMC Bank had deposits worth ₹10,727 crore, total advances of ₹4,473 crore, and gross non-performing assets (NPA) worth ₹3,519 crore. The bank registered a loss of ₹6,835 crore in FY20 and its net worth stood at negative ₹5,850 crore.

In an interview with CNBC TV, Grover confirmed that BharatPe and Centrum Group had submitted a joint bid for the cooperative bank. The combine aims to ensure all depositors of the bank are repaid once the take-over bid is accepted by the regulator. “We are bidding for it jointly with Centrum, we will let the RBI take its due time and course with the process,” he said. Grover added that the company aims to raise $400-500 million of debit and $200 million in equity going forward.

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