Various initiatives like open network for digital commerce, and the account aggregator system will help boost the small business financing segment in India, says U GRO Capital Managing Director and Vice Chairman Shachindra Nath.
“If India has to achieve 8-9% of GDP growth and MSMEs have to contribute 40% from the current 30%, credit is a must. All of this ecosystem development is actually leading an explosion in the credit to small businesses,” Nath said.
“Simultaneously, this entire environment of co-lending where banks will co-lend along with the NBFC will also unleash the liquidity flow to NBFC. I am seeing a massive creation of business around small business financing within the combination of NBFC+fintech rolled into one as long as you are smart enough to use the data technology and lending as a service model.”
Broadly, the non-banking financial company (NBFC) caters to small businesses. It is focuses on eight sectors including healthcare, education, chemicals, and hospitality among others.
It has an assets-under-management of Rs 4,375 crore as on September 30. Its current average gross disbursement rate is at around Rs 1,400 crore per quarter.
The average ticket size of its loans is at around Rs 17 lakh.
Going ahead, it expects to touch an assets-under-management of Rs 20,000 crore by 2024-25 (April-March).
Broadly, analysts expects the NBFC segment to see a squeeze in its net interest margins going ahead due to a rise in borrowing costs.
“For people like us, a large portion of our loan book is also variable by nature. So when the transmission (interest rate) comes to us, it also gets transferred back to the customer, That is the real objective of interest rate cycle that you transfer it back to the customer so the demand gets slowed down from there and so the inflation comes down,” Nath said.
“There is definitely compression in NIM generally for the industry but for us, that has not been the case. That is because we are in the third year of our full-fledged operations. Our initial borrowings from banks and financial institutions have been at a higher base. Given now that we have reached a size and scale of Rs 5,000 crore (AUM), our fresh borrowing is at market comparable rates. So on a blended basis, our cost to borrowing has remained flat.”
The company is targeting a net interest margin of 7% in 2022-23.