Exclusive: OkCredit explores M&A opportunities

Digital bookkeeping startup OkCredit has started to explore merger and acquisition opportunities despite ample runway. According to four Entrackr sources, OkCredit has had initial talks with its rival Khatabook and others including BharatPe and Udaan for potential consolidation. 

This move comes despite the fact that OkCredit has around $35 to $40 million cash left in the bank which would provide around 18-20 months of runway to the company, added the sources cited above. 

“These talks took place in the past few weeks. Its prime backer Lightspeed had a discussion with Khatabook through Sequoia,” said one of the sources on condition of anonymity. “Khatabook offered a deal in the range of $100 million that didn’t work for OkCredit.”

Sources further said that OkCredit is looking to get acquired at a valuation of over $150 million. 

“Discussions with BharatPe are still on but it’s highly unlikely that the Delhi-based payments firm will spend $100 million on the acquisition,” added the second source, requesting anonymity as the discussions are private.

Sequoia and Khatabook declined to offer comment for the story while queries sent to Lightspeed and OkCredit on Monday didn’t elicit any response. Responses from Udaan and is also awaited. We will update the story as and when they respond.

Launched in 2017, OkCredit was the first bookkeeping app in India. The company also raised around $84 million within 20 months of its launch, but Khatabook which was launched later on scored over 30% lead in terms of downloads. As per App Annie data, OkCredit has 30 million lifetime downloads whereas Khatabook has been downloaded over 41 million times.

When it comes to monthly active users, OkCredit has 1.4 million MAUs in September. Khatabook, on the other hand, has 3.88 million MAUs in the last month.

App Annie data further shows that OkCredit has amassed 10.6 million downloads in 2020 while Khatabook recorded 21 million downloads in the first 10 months of this year. 

As for weekly active users, there too OkCredit is lagging behind Khatabook with around 650K WAUs whereas the latter has 1.3 million WAUs. 

All these metrics clearly lean towards Khatabook holding pole position in the segment. 

Apart from having a lead in the core business, Khatabook is also ahead in the e-commerce enablement space. The company launched MyStore (previously Dukaan by Khatabook) in August and has been downloaded 2.2 million times. 

A month later, OkCredit also launched a similar app under the name of OkShop. At present, it has less than 250K downloads with 4,000 daily active users or DAUs. MyStore’s DAU currently stands at over 21,000.

“Khatabook has emerged as the leader in its segment and most likely it is expected to continue in the same trajectory,” said one of the people cited above in the story. “Lightspeed realized that OkCredit has to be consolidated with a larger player as follow-on funding would be tough with the current metrics.”

Even as OkCredit currently has the capital to run operations for the next year and a half, it continues to explore merger deals. Why? Sources say it’s in anticipation of not being able to raise a large round in the future. “Valuation and future fundraising depend on the growth and OkCredit hasn’t been able to demonstrate that. As a result, consolidation appears to be a way forward,” said the fourth person. 

Experts in the space believe that OkCredit and Khatabook, should they choose to resume merger talks in the future, would form a strong team that complements each other. “Khatabook’s USP lies in growth hacking and fundraising. Whereas, the OkCredit team is strong in tech and product. If they come together, they would form a formidable team,” said an industry expert, requesting anonymity.