LegalPay, India’s first tech-based litigation platform, has raised an undisclosed funding round led by marquee entrepreneur-turned-investor and former head of Thomas Cook, Ashwini Kakkar. 9Unicorns, India’s leading accelerator VC fund, also participated in the round.
The new round comes only a month after LegalPay secured an undisclosed seed funding round led 9Unicorns, early-stage investment platform LetsVenture, and angel investors such as Ambarish Gupta, founder of New York-based PE Fund Basis Vectors & Knowlarity.
Founded in 2020 by seasoned investor Kundan Shahi, LegalPay is a third-party litigation finance platform that helps entities/businesses ease the financial burden of litigation cases such as shareholder and IPR related disputes. With the fresh funds in the kitty, the startup plans to expand its product and service offerings and has entered into a new form of financing called Interim Financing under IBC, 2016. Like Litigation Financing, Interim Finance is a largely untapped market in India. LegalPay provides investors access to such newer asset classes that are much stable and give lucrative returns. The company has also on boarded Satinder Kapur, India’s leading arbitrator and partner at SKAA, as Advisor and Empaneled Lead – Dispute Resolution.
“We are thrilled with the early traction witnessed on our platform. Continuous interest from investors in this segment will enable us to unlock new opportunities. LegalPay’s unique ability to identify the investment themes along with the deep domain expertise of the risk underwriting team will ensure the turnaround of target companies. With Interim Finance, LegalPay will use financing similar to debtor-in-possession to invest in super-priority loans,” said Shahi, Founder, and CEO, Legal Pay.
Currently, the Interim Finance market is dominated by a few prominent players such as Edelweiss ARC, Eight Capital, and arms of Private Equity firms such as KKR India. With a vast risk appetite, these giants lend at higher ticket sizes of over INR 100 Crores, thus restricting the possibility of solving the actual need.
However, LegalPay is leveraging technology to solve for the mid-market insolvency market for funding requirements that start as low as INR 50 Lakhs. Such funding requirements are typically for short durations ranging from 6 to 18 months and are used for immediate needs such as payments to professionals, workers, security personnel, etc.
Interim Finance assumes importance in a market where the COVID-19 induced pandemic has pushed a record number of companies into the insolvency process. The pressure on the insolvency system has shown new cracks in the system because Resolution Professionals are struggling to raise Interim Finance to keep the defendant solvent. Interim Finance has been given a super seniority status, implying it needs to get paid back before all other creditors. Such amounts are usually 100% asset-backed, often resulting in returns higher than most existing asset classes in the country. However, even after achieving such secured statuses, banks are often unwilling to lend to such companies.
Commenting on the funding, Ashwini Kakkar, former Chairman of Via. com, who also sits on board of over a dozen-odd renowned company, said, “I am delighted to be associated with India’s first, non-recourse, Litigation Funding startup, which brings justice within reach of all people, specifically small and medium businesses. He further commented that Interim Financing would help bail out MSMEs stuck in insolvency, to whom banks are unwilling to lend to even after super seniority charges over the assets.”
Additionally, Mr. Anuj Golecha, Co-Founder of 9Unicorns commented “We see a huge market opportunity in a vastly untapped market in India which is solving an important value proposition and we see the sector heating up in the years to come. We were strongly convinced by the founder’s vision and execution capabilities. We have shown this faith by participating in the additional round of funding are excited to participate in the journey of this game-changing startup.”