The Indian arm of SBM Bank, one of the banks that has aggressively worked with fintech startups in the South Asian market, is engaging with investors to raise capital and pitching the vision of becoming one of the top banking-as-a-service providers in the country, according to a source familiar with the matter.
The Indian arm is in advanced stages of deliberations to raise between $50 million to $75 million at a pre-money valuation of about $200 million, the source said, requesting anonymity discussing private matters. The round hasn't closed, so terms of the deal may change, the source said.
The firm sees its deep partnerships with fintech startups such as Bengaluru-headquartered fintechs Razorpay and Slice as a key growth pillar, according to an investor presentation seen by TechCrunch.
SBM Bank India declined to comment.
The bank, which maintains a very limited number of physical branches in India, has actively courted fintech startups as customers, offering them co-branded cards and powering their neobanks, as it sought to differentiate itself from the large competitors that for years avoided engaging with the younger firms.
Banks have long been a favorite investment for retail investors. The value of 100 rupees invested in HDFC and ICICI Bank shares on January 1, 2010 surged to -- including with dividends -- over 1,039 and 672 rupees as of late last month, respectively, according to an analysis by Bernstein.
Some venture investors have also shown appetite to invest in banks in recent months -- Accel and Quona recently backed Shivalik Small Finance Bank, for instance -- but a growing number of other banks, including RBL and Federal Bank, have employed a similar strategy as SBM and courted many startups in the past two years.
Giant banks, including HDFC and ICICI, at the same time, have also somewhat reversed the course and are now not as hostile to startups anymore.
With the mounting pressure and local FDI rules (and investor requiring central bank's approval to take a stake of 5% or more), SBM India's funding ask may rest on investors being convinced that it's able to retain its business clients, their continued growth and it deepening its partnership with them to provide additional offerings.
The India arm generated a net revenue of $62.7 million in the financial year ending March this year, according to the presentation. Partner startups drive a bulk of this revenue.