Neobank Xinja says it is working closely with Dubai-based World Investment Group (WIG) to finalise the $433 million funding deal announced earlier this year, which should alleviate concerns from its auditor about its ability to stay solvent.
In its latest financial statements, Xinja’s auditors PWC said the neobank is “highly dependent on raising additional capital” to fund its development and maintain its capital base above prudential requirements after a net loss of $36 million last year reduced its net assets to just $25 million for the year ending June 30. This was despite Xinja raising $55 million during the year.
These conditions “indicate that a material uncertainty exists that may cast significant doubt on its ability continue as a going concern,” said the auditor in its financial statements lodged with ASIC.
Xinja founder and chief executive Eric Wilson said the bank raised $10 million from investors in September and it is anticipating further fund raising from investors shortly, including the WIG deal that was delayed by the pandemic.
“Our cornerstone future investor announced in March, the Dubai based World Investment Group, was severely impacted as an organisation by COVID which caused a significant delay in due diligence for WIG’s investment in Xinja,” he said in a statement.
According to Mr Wilson, the two parties have signed an updated fund agreement and Xinja has a team of four in Dubai working through various internal and external due diligence requirements.
“Attracting overseas investment to Australia is difficult when borders are closed and trade tensions with China are running high, and meeting stringent regulatory requirements in such a volatile economic and public health environment is challenging,” he said.
The lack of funding meant Xinja had to preserve cash and delay revenue-generating services like its loans business that would finally utilise the $500 million of deposits it is paying interest on.
Mr Wilson said the lending business has now commenced on a small pilot scale with internal staff members.
“The end to end digital lending service went into our production environment last week, and will be ready to begin a wider launch to friends and family within the next week or so pending regulatory approval,” he said.
Xinja was one of the new breed of neobanks to be given a licence last year from the Australian Prudential Regulation Authority (APRA) with plans to disrupt the lucrative retail banking sector.
The company said at the time that it would offer loans in the first quarter of 2020 and planned to raise $150 million over the next three to four years.
Other neobanks that have been given a licence from APRA include 86 400, Volt Bank, and Judo Bank. Given the amount of capital required, some observers expressed scepticism at the time about the challenges neobanks will face in taking on the big four.
APRA declined to comment on Xinja’s financial status.
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