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BharatPe to create $100 mn equity pool to make merchant partners shareholders

Bengaluru: Merchant payments and financial services provider, BharatPe, intends to make its merchant partners stakeholders in the company by launching a new $100 million Merchant Shareholding Program (MSP), in a bid to encourage and reward loyalty among merchants.

The company will be rolling out this programme to its more than 7.5 million existing merchant partners and will also extend it to new merchants who will join the platform, the company said in a statement on Thursday.

As a part of the program, BharatPe will be creating an equity pool structure worth up to $100 million, which will be allotted to eligible merchants over the course of the next four years. The company believes its MSP pool be worth close to $1 billion by the time it goes public.

In an earlier interaction with Mint in August, BharatPe co-founder and managing director Ashneer said the company plans to go public by 2024. In addition, the company was also looking to double its merchant base to 14 million by March 2023.

While offline retailers are a key contributor to the growth of numerous fintech companies including big global companies, there is no existing programme that empowers their partners to create wealth for themselves.

The MSP program is designed to address the gap of wealth creation for merchants, and recognise them as active partners in its growth, BharatPe said. In addition to this, through its equity program the company looks to drive better stickiness and enhance loyalty among merchant partners in a fast-growing fintech segment in India.

“While we as a startup community celebrate the coming of age with multi-billion dollar IPOs (initial public offerings), there is resentment brewing elsewhere. Millions of consumers and merchants are feeling left out of the digital and startup value creation in India. The folks who contribute to monthly active users, revenue of startups and valuations don’t get any equity upside or even allocation in IPOs. We will change it at BharatPe by making our merchants part equity owners and giving them the IPO upside through the first of its kind program in the world,” Grover said.

Earlier this year, BharatPe tripled its valuation to $2.85 billion following a $370 million fun raise in a primary and secondary mix, led by new investor New York-based Tiger Global Management.

“The Merchant Shareholding Program is the first-of-its-kind initiative designed to create wealth for our loyal merchant partners who intend to be with us for the long haul,” said Sumeet Singh, general counsel and head- corporate affairs and corporate strategy, BharatPe.

BharatPe’s model is not unique. Edtech unicorn Unacademy, for intance, said earlier this year that it will be providing stock options to its teachers. It has earmarked stock options worth $40 million to be issued to teacher partners over the course of the next few years. Other startups are expected to follow suit in a bid to ensure that merchants do not abandon their plaftorms.

BharatPe’s key business verticals include its merchant payments business, financing and financial services offerings to merchant partners. This year, it has diversified into peer-to-peer lending, buy now pay later credit, as well as loyalty solutions for customers. The company has a presence in close to 140 cities and plans to increase its reach to 300 towns over the next two years.

As of August, BharatPe has disbursed close to $300 million in financing to merchant partners till date and has an outstanding loan book of $100 million. More than $10 billion in annual payment value is being processed on the BharatPe platform.

In June, the Reserve Bank of India (RBI) had cleared the takeover of Punjab and Maharashtra Co-operative (PMC) Bank by a joint consortium of Centrum and BharatPe. Unity Small Finance Bank Ltd, promoted by Centrum Financial Services Ltd and Resilient Innovations Pvt. Ltd., parent of BharatPe commenced operations last week.

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