Indifi Technologies, an Indian startup offering digital lending to small and medium businesses, has raised $35 million in a new funding round led by ICICI Venture, the investment arm of ICICI Bank. Existing investors, including British International Investment, OP Finnfund Global Impact Fund I, Omidyar Network India, Flourish Ventures and CX Partners also participated in the all-equity Series E round for the eight-year-old startup.

India is home to 63 million micro, small and medium-sized businesses. These enterprises form the economic backbone of the nation, contributing over 30% to the country’s gross domestic product and providing employment to over 113 million individuals. Despite their crucial role in the economy, these businesses continue to grapple with a significant obstacle access to credit. The Reserve Bank of India’s Expert Committee shed light on this issue in its December 2018 report, estimating an alarming credit gap ranging from $243 billion to $303 billion for the MSME sector.

Founded by Alok Mittal and Siddharth Mahanot in 2015, Indifi is attempting to plug this gap through different types of loans to businesses with turnaround of between $36,400–$1.21 million a year. The startup’s online marketplace enables businesses in various sectors from travel to e-commerce, hotels, and retail to conveniently secure unsecured loans tailored to their unique needs. “That is a demonstration of the fact that other banks and NBFCs trust us to be able to run a tight lending ship not just from a technology and analytics standpoint, but from a core operations standpoint,” Mittal, Indifi’s managing director and CEO, told TechCrunch in an interview.

The Gurugram-based startup has disbursed over 73,000 loans across 400 cities, with a total disbursement value of over $497 million. In March, its assets under management reached $182 million, marking a growth of over 100% from the previous year.

Indifi’s client base includes about 30% of customers who have been in business for less than two years, typically below the cutoff for banks to provide loans. Additionally, more than 20% of Indifi’s customers are women entrepreneurs who often experience challenges obtaining credit from traditional channels. “The idea is really to go to segments of the market that are not served well,” said Mittal.

In the last 12 months, Indifi grew 100% in value and 150% in volumes of loans disbursed, Mittal said, without disclosing specific figures. The startup had been profitable for six quarters in a row since February 2022, and its profitability numbers are improving, he said. Over the last six months, Indifi has started making inroads in offering instant loans and enabling working capital finance for direct-to-consumer brands and software businesses. Mittal said the startup plans to utilize the fresh funds to continue to look for new segments in the markets it exists.

The startup also looks to improve its technology infrastructure and introduce new products to help more businesses get credit, the co-founder said. In 2019, Indifi was processing a typical loan of $7,000 size. However, it has made technology investments to lower its average loan amount by 30% over a period of 18 months, bringing it down to about $6,000. It even processes loans of $600–1,200 to cater to the needs of micro and small entrepreneurs alongside offering credit to medium-sized businesses.

“What we have been able to do in the last 18 months is to devise operating cost stacks that can serve a one-lakh rupee customer,” Mittal said.

Indifi has developed segment-specific models to accurately assess the risk of any particular model instead of relying on broad criteria, such as three years of vintage. It also incorporates a fully automated loan generation process, eliminating the need for manual data collection or underwriter oversight. “Indifi has created a best-in-class digital technology platform for lending to the large MSME sector, enabling access to credit for this highly underserved segment of the Indian economy,” said Nikhil Mohta, senior director for private equity at ICICI Venture. “Indifi’s strong relationships with ecosystem partners and liability partners stand in good stead as it targets a rapid scale up. The robust governance and risk frameworks of the company inspire confidence, and we are excited to partner with Indifi in its onward journey.”

Although ICICI Venture’s investment comes as a financial one, ICICI Bank is already an Indifi partner. Mittal believes the funding from the bank’s VC arm would open up business conversations with the bank over time. Indifi has raised over $81 million to date, including the latest funding and the Series D round of $45 million announced in November 2021. The startup has a headcount of about 700 people across product analytics, technology and business development as well as operational roles such as customer assistance and customer service.

When asked about plans to go public, Mittal said it would become a viable and attractive option at some point to raise further capital growth. Nonetheless, he emphasized that their current priority is to remain valuable to their customers by providing a diverse range of products and expanding their customer base. The startup also aims to increase the number of loans disbursed by up to three times “over the next couple of years". Indifi competes against the likes of Mayfield-backed LendingKart, Inclusive Fintech 50-invested FlexiLoans and Progcap, which counts Google and Tiger Global among its key investors.