With NBFC license, Udaan eyes credit route for expansion

A plan is being firmed up to help banks expand credit offtake further.

B2B online marketplace Udaan has received a non-banking finance company (NBFC) licence, enabling it to selectively offer credit to retailers and sellers on its platform.This is expected to open up a large, untapped base of buyers across small towns and cities away from manufacturing hubs for one of the buzziest startups in the country.
The licence comes at a time when a slew of internet companies is leveraging the credit route to expand transaction volumes on their platforms – both on the customer as well as on the merchant side.
Udaan, founded by former Flipkart executives Vaibhav Gupta, Amod Malviya and Sujeet Kumar, will tap retailers and sellers across the country to enable them to buy directly from large manufacturers across categories including apparel, electronics, pharmacy, staples, fresh fruits and vegetables and FMCG, and control end-to-end supply chain including logistics, payments and customer support.
The entity offering credit, Hiveloop Capital, has disbursed loans ranging from 10,000 to 2 lakh to more than 1,00,000 businesses, people aware of the development said.The idea is to disrupt a large offline business, which largely works on offering debt based on relationships and proximity. It also offers manufacturers a chance to expand their seller base without relying on select wholesalers and distributors who may or may not have a national presence.
“The trading market in India is inefficient and cumbersome. We are working towards making this entire value chain more transparent and efficient by solving for distribution. There is a huge scope to increase the margin of the retailer and manufacturer by building a transparent platform,” Sujeet Kumar said, explaining the company’s business model.
Udaan wants to be a multi-category trading platform with services including credit, logistics, Software as a Service, marketing, sales and distribution for the B2B trading industry.
Udaan’s other business entities include Hiveloop Technology, which runs the core marketplace business, and Hiveloop Apps for payment solutions, according to regulatory filings.
“The intent is to offer access, affordability, transparency and speed as a service to both buyers and sellers,” Kumar added. He declined to share sales numbers, but industry sources peg that at $135-$150 million per month as of May.
Its largest competitor in the fresh fruits business, Ninjakart, recently raised $90 million led by Tiger Global and closed fiscal 2018 with a revenue of Rs 54 crore on a loss of Rs 23 crore, regulatory filings show.
Current trade channels have multiple pain points for both buyers and sellers. Marketplaces like Udaan, Ninjakart, Amazon, Reliance Industries and others like Metro Wholesale India, Paytm Wholesale and Indiamart are trying to solve this.
Over the last 18 months, Udaan has been offering low commission fees and subsidised logistics services to drive adoption.
Several other marketplaces that have launched during this time, like JustBuyLive, Wydr, Shotang and Jumbotail have either scaled down or shut shop.
Investors ET spoke to indicated that the opportunity to dis-intermediate the middlemen, and tap into the big basket sizes, and repeat purchases make the sector attractive for investment.
Udaan raised a $225 million in equity financing in September last year, led by two of its existing investors – Yuri Milner’s DST Global and Lightspeed Venture Partners – a transaction that valued it at $1 billion.

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