Welcome to our ‘Fund in Focus’ series where we profile our member VC funds, underscore their investment philosophy, and highlight some of their interesting work. In this exclusive chat with Mehekka Oberoi, Fund Manager, Fintech IIFL (India Infoline Group), she opined how IIFL Fintech Fund - India’s premier early-stage fintech-focused fund, spearheads innovation in financial services by supporting startups driving financial inclusion and digital transformation. With a robust portfolio attracting over $100M in follow-on funding and a strong track record of successful exits, IIFL leverages its conglomerate ecosystem to empower fintech and SaaS platforms. The fund aligns with IIFL Group’s vision to lead technological advancements, bridging gaps in domestic credit and insurance penetration while fuelling India's digital growth story.
Fund In Focus: Empowering Fintech Innovation: IIFL Fintech Fund's Impact on India’s Digital Economy
Mehekka Oberoi, Fund Manager,Fintech IIFL (India Infoline Group)
Spokesperson: Mehekka Oberoi, Fund Manager,Fintech IIFL (India Infoline Group).
1. IIFL Fintech Fund has emerged as India’s only early-stage fintech-focused fund backed by a financial services conglomerate. What inspired the creation of such a specialized fund, and how does it align with IIFL Group's overall vision?
IIFL as a Group comprises IIFL Finance, IIFL Securities & 5paisa. Through IIFL finance we cover the complete gamut of lending (gold loan, home loan, business loan and microfinance), IIFL Securities offers wealth management and broking services and 5paisa is amongst the top 10 discount brokers in India today. This makes us one the largest financial services conglomerate in India today. IIFL has been at the forefront of technological innovations ever since we started as a group. In our digital journey, we have partnered with a lot of early stage companies and become early adopters of their technology. We were the first one's in the country to have paperless branches. Multiple companies where we adopted the technology early on have become market leaders in the segment eg: Zoho, Perfios, Leegality, Finvu.
IIFL's vision is to continue to be at the forefront of technological innovation and partner with new age startups. Through this fund our idea is to give access to funding to the startups that we are working & collaborating with as well. IIFL is a client to the startups we have invested in, then makes it a win-win for both these companies and our clients. Our investee companies get the benefit of our distribution reach and testing their tech out at scale. And clients get access to these companies at an early stage.
2. Why did the fund choose to prioritize early-stage fintech and SaaS platforms? What differentiates these sectors as high-potential investment areas in India?
IIFL as a group collaborates and partners with the companies along with giving them access to funding. Since we are a financial services conglomerate our capability lies in assisting the fintech and SaaS platform companies that have use cases in financial services. Our distribution reach and scale can help these companies test their product and technology out at scale creating a win win for us and these startups. Our forte, mentorship, access and expertise lies in these areas. Additionally, fintech is the only segment in India which is expected to grow 11x vs Indian online retail and indian consumer tech that is expected to grow 5x and 3x respectively. Government focus is also on these segments from a technology standpoint :UPI which is going global, AEPS, BBPS, E-KYC, Digi locker, account aggregators are all Govt led initiatives.
3. With the significant gaps in domestic credit, and insurance penetration, how does IIFL Fintech Fund plan to bridge these through its portfolio companies?
Domestic credit and Insurance penetration is lower in India to the tune of 3x and 1.6x vs globally. There is enough headroom for penetration to go up across these segments. Through our fund we are looking to back technology infra players that can help with improving the penetration of these services further. Technology adoption is the only way through which a massive growth and penetration can be achieved.
4. The fund’s portfolio companies have collectively attracted $100 million+ in follow-on funding. Could you share some strategies or insights into how you position your portfolio companies to secure subsequent funding?
Subsequent funding is a function of company's performance and growth. We give our portfolio companies a complete access to IIFL's ecosystem. They get inputs on ways to enhance their product and technology, access to our business leadership team to get timely inputs on Marketing, sales, business. We help them with references that can help them showcase their product and technology to various other institutions. This helps them in growing their business and creating a market leadership position. Additionally, we have a large access to various funds due to our strong investment banking practice that helps make the required introductions.
5. The fund achieved an 80% Return on one exit in under 18 months. What were the key factors that enabled this successful exit, and how do you evaluate exit opportunities for your investments?
The company that we exited from our portfolio was Trustcheckr, this got acquired by Truecaller. Trustcheckr was a fraud detection platform, that had strong capabilities to identify fraud using mobile number and social footprints of the users. Truecaller was looking to enter India with an enterprise level solution and were thus evaluating options. Trustcheckr's platform could have got enhanced with Truecallers data and this led to a win win situation for both companies. For the fund, we have 3 pronged exit strategy- since we come at an early stage and value the technology- acquisition, IPO and secondary stake sale are exit strategies for the fund.
6. GrayQuest, another portfolio company, focuses on digital financial solutions for India’s education ecosystem. What was your investment thesis for GrayQuest, and how do you see fintech shaping education in India?
School fees is on an upward trend in India and is becoming a major expenditure for all households. Parents are looking for easy payment plans to reduce their burden. And hence there is a need for companies like Grayquest. That are focused on giving parents a no cost EMI options to make school fees payment. At the same time, schools do not have a collection infrastructure to collect in case a parent defaults while these fintechs have means for collections. And hence by giving a small upfront fees discount school gets benefited without any collection responsibility. This make it's a win win proposition for both schools and the parents. A solution like this over long term will lead a lot of parents being able to afford even schools that have a little higher fees and provide better education environment. This makes, Grayquest an exciting bet for us.
7. How does IIFL Fintech Fund envision contributing to India’s broader financial inclusion and digital transformation goals?
IIFL fintech fund is at the forefront of supporting startups that are building for financial inclusion and digital transformation. Our portfolio companies comprise of players that cover the complete digital stack in India- Leegality (digital signing), Finvu (account aggregator- digital data transfer), Data Sutram (Fraud detection), Finarkein Analytics (Digital Data transfer ), Finbox(Infra for growing financial inclusion through lending), Riskcovry (Infra for supporting financial inclusion in Insurance), Insurance Samadhan(Insurance grievance redressal), Trendlyne (improving financial awareness and analysis), Castler (Digital transformation for escrow banking), Xtracap Fintech (improving financial penetration for tier 2 and tier 3 MSMEs in India). Our Philosophy is to support these startups that are building for India and India's growth and digital transformation journey in the financial services space.