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India’s fintech industry has experienced significant growth and transformation in recent years, driven by technological advancements, regulatory reforms, and a surge in digital adoption. With over 2100 fintech companies, India now boasts the third-largest fintech ecosystem worldwide.
According to the country’s Economic Survey 2022–23, Indian fintech has had an 87% adoption rate in the country, as compared to the global average of 64%. Major segments in India’s fintech sector include payments, digital lending, insurance technology and digital wealth management.
Additionally, India’s fintech sector’s market size was estimated to be around $584 bn in 2022. Looking forward, the market size of the sector is projected to increase to $1.3 tn by 2025, growing at a CAGR of 31%. Additionally, it is anticipated that by 2030, the sector’s assets under management and revenue would total $1 tn and $200 bn, respectively.
“The Fintech sector in India has witnessed funding accounting to 14% share of Global Funding. India ranks #2 on Deal Volume. The Fintech Market Opportunity is estimated to be USD 2.1 Tn by 2030,” as per the Indian government.
Digital lending and payments lead India’s fintech sector
With new Indian fintech companies propping up in the country in the last few years, several factors have boosted growth in the sector. One of them has been the rapid adoption of digital technology in the country.
As per the latest State Of Indian Fintech Report, India has the world’s second-highest number of smartphone users, witnessing a tenfold rise from 91 million users in 2012 to 931 million in 2022. Also, the number of internet users in India is expected to rise by 1.7 times by 2030 to 1.3 billion, up from 749 million in 2020.
“The COVID-19 pandemic has led to an inevitable surge in leveraging digital technologies… India’s digital economy is expected to witness exponential growth to $800 billion by 2030 on the back of digital public infrastructure, the development of UPI, and the COVID-19 pandemic,” said Ernst & Young.
Among various sub-sectors in India’s fintech sector, India’s digital lending (lendingtech) and payments markets have emerged as the segments with the greatest market size. India’s digital lending market had a market size of $270 bn in 2022. It is expected to grow at a CAGR of 22% to $1.3 tn by 2030.
“Various socio-economic factors such as growing per capita income, broader financial inclusivity and greater internet penetration across rural India are the critical triggers behind the growth of the Indian lendingtech market,” said the report.
Meanwhile, India’s digital payments sector had a market size of $165 bn last year. Furthermore, the volume of Unified Payments Interface (UPI) transactions increased by 200 times, from 4.5 million in January 2017 to 10 billion in January 2023.
The total value of the digital payments segment increased by 600 times during this period. Along with that, UPI recorded the highest number of transactions ever at 8.8 billion in April 2023. Looking ahead, the segment is expected to reach $100 tn in transaction volume and $50 bn in terms of revenue by 2030.
“Enabled by UPI, Indian fintechs have made rapid gains in the payments space over the past few years. Digital payments have soared… Fintechs are expected to play a vital role in increasing financial inclusion and digital adoption,” said Bain and Company.
How to invest in India’s fintech sector
With India’s fintech sector growing at a rapid pace, investors might consider investing in the following companies:
Paytm
It is a fintech company that specialises in digital payments and financial services. Paytm’s revenues increased 51% year on year to Rs 2,334 crore ($282.95 m) in the first three months of this year. Meanwhile, the company’s EBITDA before ESOP costs increased from the previous quarter to Rs 234 crore ($28.36 m).
This fintech firm has a market cap of $6.41 bn and is listed on the Bombay Stock Exchange (BOM: 543396) and the National Stock Exchange of India (NSE: PAYTM). The company’s stock has risen by 42.11% in the past year. Along with that, the stock has a price-to-book ratio of 4.06.
PB Fintech
This firm offers an online marketplace for insurance and loan products, along with providing online marketing, consultancy, and other financial technology services to insurers and lending partners.
For the quarter ending March 2023, PB Fintech’s revenue increased 61% year on year to Rs 869 crore ($105.32 m). Insurance premiums increased by 65% year on year to Rs 3,586 crore ($434.62 m), while credit disbursements increased by 53% year on year to Rs 3,358 crore ($406.91 m).
Listed on the Bombay Stock Exchange (BOM: 543390) and the National Stock Exchange of India (NSE: POLICYBZR), the company has a market capitalization of $3.40 bn. The shares of the firm have surged by 8.34% in the last 12 months. Furthermore, the company’s stock has a price-to-book ratio of 5.23.
“The stock has significantly corrected since its listing, providing a good entry point for investors. It absorbed the supply coming from the post-IPO lockup in mid-November 2022 quite well. The fundamental overhangs of last year are behind us, and we find valuation attractive,” said Morgan Stanley to an Indian media outlet.
CAMS
Computer Age Management Services Limited (CAMS) is India’s largest mutual fund transfer service that serves Indian asset management firms. The company reported a 2.3% year-on-year rise in its revenue to ₹249.2 crore ($30.2 m) in the quarter ended March 2023. During the same period, It reported a 0.7% year-on-year spike in its net profit to ₹74.36 crore ($9.01 m).
CAMS has a market cap of $1.29 bn and its stocks are traded on the Bombay Stock Exchange (BOM: 543232) and the National Stock Exchange of India (NSE: CAMS). In the past year, the firm’s stock has decreased by 12.6%. It has a price-to-book ratio of 13.57 and a PE ratio of 36.92. A final dividend of Rs 12 ($0.15) per equity share was announced this year.
Editor’s note: All stock movement figures as of June 14, 2023.
