Litigation finance start-up LegalPay ties up with NBFC for insolvency financing

LegalPay, a fintech start-up focused on litigation financing, has partnered with Jumbo Finance, a non-banking financial company (NBFC) for secured interim financing. This is part of the Delhi-based start-up’s overall plans to have such partnerships at a time when an increasing number of companies are going under insolvency. 

This assumes significance as under the Insolvency and Bankruptcy Code, 2016, interim financing is a short-term super-secure loan that allows an insolvent company to remain operational while it is undergoing a Corporate Insolvency Resolution Process (CIRP). 

LegalPay is targeting mid-market companies including MSMEs undergoing insolvencies that have a requirement in the range of Rs 10 lakh to Rs 5 crore. Meanwhile, India’s stressed asset market is estimated to be worth around $150 billion and is likely to see an uptick in deal activity going forward. 

According to the recent financial stability report by the Reserve Bank of India, the gross non-performing asset ratio is likely to increase from 7.48 per cent in March 2021 to between 9.80 per cent and 11.22 per cent in March 2022. 

“We are aggressively capturing the insolvency market and partnering with renowned NBFCs to deploy funds in insolvency market and enjoy lucrative interest rates for short-term super-secured lending. This will provide investors with more opportunities to invest in distressed debt assets over the foreseeable shorter time horizon,” said LegalPay CEO and Founder Kundan Shahi. 

In a similar context, Smriti Ranka, Managing Director of Jumbo Finance said: “Investing in distressed debt assets is an interesting space for us as investors and we look forward to our partnership with LegalPay to explore opportunities in the insolvency market.

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