New Delhi, Apr 18 (PTI) Small businesses-focused digital lender NeoGrowth Credit Pvt Ltd is planning to disburse about Rs 2,500 crore loan in the current financial year, as the digital lending space is growing rapidly in the country.
The company is also seeking an equity infusion of about Rs 400-500 crore to funnel growth, the company's CEO Arun Nayyar said.
NeoGrowth funds the small businesses and self-owned and proprietorship enterprises in the retail segment. It also gauges the creditworthiness based on their digital transactions than the conventional means of underwriting and other processes involved in the credit industry.
'We are a seven-year-old SME-focussed digital lending company. Our lending is based on our customers' digital track record in terms of digital payments such as debit and credit transactions.
'Based on this, we are able to assess their credit worthiness and then provide loan to them. This data gives us a good understanding about volume of their businesses and their expenses,' Nayyar told PTI in an interaction.
Underlining that 2020 had coronavirus-related economic stress and there were inherent collection problems, Nayyar said that overall, it has not materially impacted the strength of the company.
'Our loan outstanding came down around 30 per cent in the first half (2020-21) because we were not disbursing anything but post-September, the demand was fairly strong. In fact, the January-March (2021) quarter was our highest-ever disbursal in upwards of Rs 450 crore,' He said.
Nayyar added that the coronavirus pandemic has led to a huge expansion of digital payment across the industry and NeoGrowth is well positioned to leverage this opportunity.
'In the current fiscal, we target around Rs 2,500 crore of loan disbursal,' he said.
Had it been a normal year, at a run rate of Rs 450 crore per quarter, NewGrowth could have easily done disbursals of Rs 1,800 crore, he said adding that the company disbursed around Rs 700 crore in FY21.
In the financial year 2019-20, NewGrowth had lent Rs 1,450 crore to its customers.
The company has over 20,000 customers to whom it gives mainly working capital loans beginning from Rs 1 lakh to as much as Rs 7-8 lakh.
'Our average loan size is of around Rs 7-8 lakh and our area of focus is largely consumer-focussed retail businesses. These are mainly small business owners and a large part of our customers are sole proprietors who run their shop themselves,' said the company CEO.
The company also does supply chain financing where 'we fund our SME (small and medium enterprises) clients based on their digital payment history with large corporates'.
'We are currently present in top-25 cities of the country. I think we are covering large part of digital payments market.
'As digital payments are increasing in the country, we continue to expand in tier-II and -III cities. Currently, given our growth plans, we think we can support our growth for the next couple of years,' he said.
Nayyar said the company is backed by strong set of investors and it is looking to raise around Rs 400-500 crore equity from them in the current financial year.
Pharmacies, grocers, small hardware stores, apparel stores, and restaurants are the kind of proprietors NeoGrowth caters to. The rate of interest charged ranges from 18-19 per cent to 24-25 per cent, said the CEO and it provides collateral free loans to these segments.
Recently, the company launched NeoCash Insta which is basically Rs 1 lakh loan disbursed digitally within 24 hours.
'This year, we plan to raise around Rs 400-500 crore of equity. Our current equity can support growth this year but we need equity capital for our next level of growth. So, we will be raising equity this year,' he added.
The RBI-registered non-banking finance company (NBFC) is also planning to target co-lending in a big way and is in talks with larger NBFCs and some banks to cater to the loan demand of its targeted segment.
'We see co-lending as a large opportunity. Banks and larger NBFCs do not have presence in this space, whether in terms of acquisition or underwriting. So, what we will do is to help them acquire clients, help them do a first level of credit-risk check. So, I can leverage the capital available with those larger NBFCs and banks,' Nayyar added.
He said the company is aggressively preferring the co-lending model this year.
'Our co-lending ratio is around 4-5 per cent of our business today and we plan to take it to a significant number during the year. So, we have aggressive plans for our co-lending business.
'We are talking to a few players and we are hopeful that we would be able to build partnership with around 10-15 large players in this financial year,' said the official.
NeoGrowth said it has credit lines from Indian Bank, SIDBI and apart from this, the company also taps NCD (non-convertible debenture) and ECB (external commercial borrowing) routes to source its funding.
'I think currently the banks are risk averse to small NBFCs like us who are BBB rated,' he added.
The credit to such players is low not only in terms of direct lending but also through partnerships such as co-lending.
Nayyar said banks should have liberal view about lending to NBFCs because they are the connect between the financial system and consumers.
NeoGrowth is backed by Omidyar Network, Aspada Investment Company, Khosla Impact, Accion Frontier Inclusion Fund – Quona Capital, IIFL Seed Ventures Fund and Leapfrog Investments. PTI KPM HRS hrs