Ride-hailing firm Ola has entered into an agreement to acquire Avail Finance, a financial services startup for the blue-collar workforce.
The acquisition will help the Bengaluru-based firm to expand its financial services offerings including neobanking, said Ola in a statement. The transaction, however, is still awaiting approval from shareholders.
As a part of the deal, Avail Finance’s leadership team will be joining Ola Financial Services. ANI Technologies, which is the parent company of Ola, owns 100% holding in Ola Financial Services.
While Ola did not disclose details of the transaction, a Moneycontrol report estimates that it will be a $50 million share swap deal. It appears to be a down round for the company which was valued at around $70 million during its last equity round (Series B) in August 2020. It also raised $3.24 million debt from Alteria Capital in May last year.
Founded by Ankush Aggarwal (brother of Ola’s founder Bhavish Aggarwal) and Tushar Mehndiratta in February 2017, Avail Finance caters to India’s blue-collared workforce who are currently underserved by organized lending institutions.
It provides collateral-free personal loans of up to Rs 20,000 to meet their financial needs. According to the company, there is no interest for a personal loan of Rs 5,000 for a month.
It’s worth noting that Bhavish Aggarwal is a director on the board of Avail Finance and has invested in the Bengaluru-based company along with Ola and several angel investors including Ankit Bhati, Kunal Shah, Binny Bansal and Manish Patel. Ola currently owns 9% stake in Avail Finance whereas Matrix Partners and Alpha Wave are common investors in both companies.
Last year, a report by Mint highlighted that Avail Finance had been using its own money to lend, circumventing a key RBI rule that allows only banks and licensed non-banking financial companies (NBFCs) to lend.
Avail Finance’s struggle can also be gauged from its financial performance in the last fiscal year. The company’s revenue from the operations saw a decrease of 20% to Rs 4.48 crore in FY21 from Rs 5.59 crore in FY20, as per its regulatory filings. During the period, its expenses shrank 31.79% Rs 39 crore in FY21, however, the losses remained almost similar i.e. Rs. 37.21 crore in FY21 and Rs 37.48 crore in FY20.
