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Razorpay acquires TERA Finlabs in push for startup, MSME loans – Times of India

July 19, 2021

New Delhi: Fintech startup Razorpay has acquired TERA Finlabs, a Bengaluru-based startup that provides technology, risk and capital solutions to enable embedded financing solutions for businesses.
The company, however, did not disclose the financial details of the transaction.
“This acquisition of TERA Finlabs is aligned with Razorpay’s strategy of financially supporting as many MSMEs as possible by building core competencies in capital solutions, credit underwriting, and data-driven risk management capabilities,” according to a statement released. “TERA will provide its entire technology stack, risk management capabilities, and onboarding solutions to create and enable a credit line for Razorpay’s merchant network.”
Razorpay Capital along with TERA Finlab’s technology capabilities will be able to service the credit needs of over 10,000 businesses in India by next year, the statement said. The unicorn had forayed into the business-to-business (B2B) SME lending space with the launch of Razorpay Capital in 2019.
TERA Finlabs, an Indian subsidiary of UK-based digital lender GAIN Credit, is Razorpay’s third acquisition in less than three years. Razorpay had acquired Thirdwatch—an AI-driven company that helps reduce return-to-origin fraud losses in e-commerce—in 2018, and Opfin—a payroll management software company—in 2019.
According to Razorpay’s co-founder and chief executive Harshil Mathur, Indian banks are wary of providing business loans to startups and new small and medium enterprises (SMEs) due to the risks attached to their new revenue models. “Through our lending platform, Razorpay Capital, we have been striving to solve these cash flow challenges, making it easier for businesses to get finance and grow,” he said. “And progressing in that journey, an acquisition such as this fits perfectly with our vision of developing tailormade affordable credit solutions for the underbanked small businesses across industries so that they can digitally transform and disrupt.”
The team at TERA Finlabs comes with exceptional domain knowledge in credit underwriting and risk management, Mathur said, adding that Razorpay sees immense value in TERA Finlabs core lending infrastructure capabilities.
“MSMEs were an underserved market for a long time. However, in the last 16 months, they have started to show rapid growth with their adoption of digital,” Pradeep Rathnam, co-founder and chief executive of TERA Finlabs, said. “And this has created an opportunity for significant disruptions in the lending sector—Embedded Credit is one such innovation that I’m certain will transform this space.”
Razorpay, which is backed by investors like GIC, Tiger Global, Sequoia Capital India and Mastercard Inc., has been witnessing 40-45% sequential growth. It has achieved $40 billion TPV (Total Payment Volume) and currently powers payments for more than 8 million businesses. It aims to reach 200 million customers by 2021.

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