Raise Financial Services, the parent company of investment and trading app Dhan, is exploring a potential funding round of $100 million. This move could catapult Dhan into the coveted unicorn club, with a valuation reaching a staggering $1.2-1.5 billion.
Early Stage Discussions
While the talks are still in their early stages, investment bank Avendus has been shortlisted to manage the fundraising process. Founded in 2021 by former Paytm Money CEO Pravin Jadhav, Dhan competes with established players like Zerodha and Groww in the Indian discount broking market.
Riding the Retail Boom
This fundraising comes at a time when the Indian stock market is experiencing record highs, driven by robust participation from retail investors. However, concerns have been raised by the government and regulators regarding the surge in futures and options (F&O) activity.
India’s Unicorn Drought
With just three unicorns minted in 2024 (Porter, Krutrim, and Perfios), investors remain cautious after the 2021 funding frenzy. While new-age companies like Zepto and Meesho have secured significant funding, overall investment activity has been subdued.
Dhan’s Growth Trajectory
This potential funding round would be Dhan’s largest since its inception. The company’s valuation is expected to jump significantly, from around $150 million to a staggering $1.2-1.5 billion. Raise Financial Services CEO Pravin Jadhav declined to comment on these developments.
Fueling Growth and Expansion
The fresh funds are likely to be used for business expansion and to gain a competitive edge. Dhan aims to attract a larger market share by not only offering investment and wealth management services but also venturing into areas like financing, payments, and insurance, as per its website.
Investor Landscape
The funding round is expected to see participation from both new and existing investors in Raise. Existing backers include Beenext, Mirae Asset Venture Investments, 3one4 Capital, and Rocketship.vc. Sources suggest Dhan’s confidence in securing such a high valuation stems from its projected revenue run rate of $100 million (around Rs 830 crore) and a claimed net profit margin of 40%. Based on this projection, Dhan might be aiming for a revenue multiple of 12-15X.
Competitive Landscape
For comparison, publicly listed competitor Angel One has a revenue of around $500 million and a market cap of $2.3 billion, translating to a revenue multiple of roughly 4.5X. Dhan also faces stiff competition from established players like Groww, Zerodha, and Upstox.
Jadhav’s Return and Paytm Rivalry
Prior to Dhan, Pravin Jadhav was instrumental in growing Paytm Money. However, he left the company in March 2020 under reported disagreements regarding compensation. Since then, Paytm Money has lost market share to its rivals and recently implemented leadership changes to revive its business.
Social media posts from Jadhav suggest a strained relationship between him and Paytm Money. He has taken shots at his former employer, highlighting Paytm Money’s declining user base compared to Dhan’s growth.
Dhan’s active user base has risen from 0.38 million in January 2024 to 0.61 million in June 2024, as per data from the National Stock Exchange (NSE). Conversely, Paytm Money’s active users have steadily declined from 0.8 million to 0.77 million during the same period.
Staying Relevant in a Crowded Space
The discount broking market is highly competitive, with players like Zerodha and Groww holding a significant user base. To remain relevant, Dhan and its competitors are diversifying their offerings, aiming to retain users by providing a wider range of financial services. For example, Groww offers mutual funds, lending, and UPI payments, while Angel One focuses on building a comprehensive fintech super app. Dhan, too, has introduced mutual fund investment options on its platform.
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