Godrej Capital, the non-banking finance company (NBFC) arm of Godrej Group, plans to expand its MSME lending operations to 26 cities from 11 as of now in 1-2 years, Manish Shah, MD & CEO, said. The two-year old company is preparing to enter new areas such as supply chain finance by H2FY24 and unsecured business lending by Q4FY23.
“Financing is one way that we can help SMEs to grow their business but it is not the only way so we are also exploring how we can assist businesses in growth by providing them with knowledge transfer, bringing costs down and various other things so that we can help SMEs to grow that pie,” Shah said in an interaction.
The company is aiming at assets under management (AUM) of Rs 6,000 crore in FY23 from Rs 4,000 crore in the last year. In the MSME segment, the company has a sector agnostic approach and focuses on businesses in the manufacturing, trading and services having turnover of Rs 1-50 crore. It has some exposure to entities with Rs 50-100 crore turnover, but that is not the main focus area of the company, he said.
The company started its business by issuing home loans and loan against property (LAP) for real estate projects within the group and subsequently diversified to other developers. The borrowers are mostly salaried home buyers and are mostly end users. The ticket size of the company in the home loan segment is Rs 40,00,000 to Rs 1 crore.
The space is extremely competitive as banks are dominating the segment, with total outstanding home loans of Rs 18 trillion as of November 18, as per RBI data. There is a challenge to operate in this segment as strong players have populated the sector, Shah said, adding that there also exists a large opportunities in terms of borrower demand. From a consumer perspective, a strong brand, better service and satisfaction goes a long way in driving business rather than only focusing on interest rate, he said.
“In that sense, we are quite fortunate because of the group’s brand. It has very strong recognition among our buyer group. Even though the financial services businesses is new, it is a startup within 125 year old group,” Shah said.