Lendingkart, a prominent digital lending platform serving small and medium enterprises (SMEs) in India, is set to become the majority shareholder of Fullerton Financial Holdings (FFH), a subsidiary of Singapore’s sovereign wealth fund, Temasek. Fullerton’s planned acquisition of a controlling stake marks a pivotal moment for Lendingkart, which has long been a key player in the fintech-driven MSME lending space.

The transaction, which is still awaiting regulatory approval, will see a capital infusion of up to Rs 252 crore (approximately $30 million). This funding will help Lendingkart accelerate its technological advancements and expand its lending services into underpenetrated markets across India.

However, the deal comes at a much-reduced valuation for Lendingkart. The Economic Times reported that the company’s valuation has dropped significantly to around $100 million, a steep fall from its previous valuation of $690 million after a small equity round and $12 million in debt financing just a few months earlier in June. This down round underscores the challenging fundraising environment in the fintech sector, compounded by a gap of over four years since Lendingkart’s last major equity round. The company largely relied on debt financing to fund its growth during this period.

Lendingkart has raised Rs 1,050 crore ($126 million) in equity from several notable investors, including Fullerton, Bertelsmann, Saama Capital, Mayfield India, Sistema Asia, and India Quotient. Before this latest round, Temasek’s Fullerton already held a significant 38% stake in the company.

“This investment represents a vote of confidence in Lendingkart’s ability to transform the MSME lending landscape. Our goal is to replicate FFH’s past successes in the Indian financial market,” said Lendingkart’s co-founder and CEO, Harshvardhan Lunia.

Lendingkart has made a substantial impact in the Indian SME financing space, disbursing loans with an average ticket size of Rs 5 lakh to Rs 6 lakh. The platform has provided over Rs 18,700 crore in loans to more than 300,000 businesses across 4,100 cities. In FY23, the company’s operational revenues grew by 33.4% to Rs 858 crore, with a profit of Rs 119 crore.

Looking ahead, Lendingkart had been gearing up for a potential initial public offering (IPO), with reports from last year indicating plans to cross Rs 10,000 crore in assets under management (AUM) before going public. Whether these plans will proceed after the significant drop in valuation remains to be seen.