Vernacular Social Media platform startup ShareChat’s parent company Mohalla Tech has raised nearly $49 million in debt from existing investors. According to the company’s regulatory filing, the company has passed a board resolution to issue 4,895 Series I debentures at an issue price of $10000 each to raise $49 million.

The existing investors who took part in the fundraising were Temasek, Lightspeed, HarbourVest, Moore Strategic, Rimco and Alkeon who invested in the debt round. Their debt will be converted into equity at a valuation below $2 billion in the next round. According to the report of TechCrunch in December that ShareChat was facing a steep valuation cut.

The Bengaluru-based startup, which operates a popular social network supporting a dozen Indian languages as well as a short-form video app, announced on Monday that it had raised the fund in a convertible round. It did not disclose the valuation at which the funds were raised but strongly denied that its new valuation was below $2 billion, asserting there was “no valuation” attached to the round.

ShareChat is backed by Google, X, Snap, Tiger Global, Twitter, Moore Strategic Ventures and Tencent. Till date the company has raised $1.3 billion. It was valued at $4.9 billion in a funding round it raised in mid-2022. This freshly raised fund came at a time when was looking to raise $50 million in a down round to the tune of $1.5 billion.

The social media platform startup is targeting large equity round but the company is finding it difficult to rope in new and existing backers. It also put several cost-cutting measures and laid off 700 employees across two phases in 2023. The company has been finding difficulty for its inability to monetize from the user base which has low-purchasing power.

Still after the nine years of operation ShareChat had to spend nearly Rs. 4,000 crore in FY23 to earn Rs.533 crore in revenue. it spent Rs. 7.16 to earn a rupee of operating revenue in the last fiscal. This is one of the highest expense-to-revenue ratios for a unicorn in FY23.

The share of loss widened due to the write-off undertaken by the company for the acquisition of Moj’s competitor MxTakaTak. The company spent heavily ($700 million via cash and stock) to acquire the Times Internet-backed company. The startup acquired local rival MX TakaTak in a deal valued over $700 million in 2022.

Ankush Sachdeva, ShareChat’s co-founder and chief executive said, “When the market turned, we had to temper [acquisitions and creator payments] and move towards more profitable growth. In terms of traffic, ours is lower than those of Instagram and YouTube, but we are the largest in terms of a standalone app.”