Noida-based fintech unicorn Pine Labs is in advanced negotiations to acquire Setu, the Bangalore-based API (application programming interface) infrastructure company, two people with knowledge of the matter said. The deal size is upwards of $70 million and the due diligence process is currently underway, one of them said.
Setu, founded by Sahil Kini and Nikhil Kumar in 2018, started with offering open APIs across four categories—bills, savings, credit, and payments. APIs are the bridge used by software applications to interact with each other. Setu is Hindi for bridge and the company offered a suite of APIs and software solutions that could be deployed by fintech firms.
“Lately, it was leaning more towards account aggregation and Open Credit Enablement Network (OCEN), with limited traction,” one of the persons cited above said. Setu is one of the technology service providers in the account aggregator ecosystem, which helps users share their financial data to banks and other institutions securely.
The company has raised a total of $18.5 million in funding till date. In 2019, Setu raised $3.5 million investment from Lightspeed India Partners and Bharat Inclusion Seed Fund; and in 2020, it received $15 million from Falcon Edge and existing investors. Kumar previously worked as a fellow at iSPIRT Foundation that built an ecosystem for UPI, while Kini worked at Aspada Investments. The two had worked on Indiastack projects such as Aadhaar and UPI.
Sequoia-led, IPO-bound Pine Labs, which is expected to list on the US exchanges soon, has been looking to diversify and enter adjacent growth areas. The Noida-based point-of-sale (PoS) major is investing to scale Plural, its newly launched brand for online payments products.
The company is quite bullish on the lending side and has built a strong EMI portfolio, where it works with over 70 brands in India. It is also expanding its BNPL (buy now, pay later) business across India and Southeast Asia. Last year, the merchant-focused payments company entered the consumer payment space with its $45-million acquisition of Fave. Earlier this month, Pine Labs raised $20 million from State Bank of India. Till date, it has raised over $1.4 billion.
On 7 December, Economic Times reported that Pine Labs is in talks to raise $100 million from Falcon Edge at around $5-5.5 billion. If this happens, then Falcon Edge could become a common investor in the two companies.
On the other, Pine Labs CEO Amrish Rau is an investor in Chennai-based M2P Fintech – which operates in the same segments and businesses as Setu. Despite being the oldest player in the ecosystem, M2P only rose to prominence in the last one year. Recently, it raised a new round at a valuation of about $605 million—nearly double the value it fetched just three months ago.
In FY21, Setu posted an operating revenue of Rs 3.31 crore, up from Rs144 during FY20. It earned Rs 5.7 crore as other income from interest on bank deposits. The losses for FY21 stood at Rs 19 crore versus Rs 7 crore a year ago.
When contacted, Pine Labs CEO Amrish Rau said: "We wouldn’t want to comment on this."
Setu co-founders Kini and Kumar did not respond to messages requesting comment.
