Bharatpe is looking to turn profitable by March and is aiming for an IPO in the first quarter of FY25. Suhail Sameer, CEO, tells Tushar Goenka and Shobhana Subramanian that tighter digital lending norms would not really hurt its products. BharatPe, he says, hopes to leverage its investment in Unity Bank by giving it referrals from the incremental business.
How has the business done in FY22?
Our revenues have come in at roughly around Rs 700-720 crore, compared with Rs 119 crore in FY21. We lost a lot of money last year, over the losses of Rs 277 crore in FY22, but we are aiming to turn EBITDA-profitable by March 2023. Right now, merchant lending and payback are profitable, but the POS business is making losses. Not only do all the three need to be profitable, they need to be profitable at a level where they cover customer acquisition costs, which right now are around Rs 200 per customer.
How do you leverage your investment in Unity Bank?
Ideally, we would like to do all loans with the bank, because we have a beneficial ownership in it and we would like to build a full tech stack. We do UPI on-boarding with multiple partners and would ideally like to do a large chunk on Unity Bank because it will enjoy the float of transactions and we benefit.
We need to do it on the right commercial terms and at an arm’s length; we will not give any other partner better terms than the bank, but we will also not compromise BharatPe’s commercials. We will move as much of our referral business as we can – lending, investments, merchant acquiring – to the bank incrementally, but we will not touch existing relationships. That will help scale the bank where we are shareholders. Also, we will be able to control the technology.
The RBI seems to be getting stricter about digital lending…
There is nothing drastic in the regulatory guidelines that could slow us down.
We have planned for digital lending guidelines. For instance, we let the bank pull out the CIBIL score of the borrower and we don’t pull the e-nach (Electronic National Automated Clearing House). Therefore, we don’t see too much of a problem.
So, in your BNPL product, banks and NBFCs are lending?
It is a consumer loan, much like a credit card, and funds are coming from banks and NBFCs. We don’t earn interest, only inter-change, by enabling the transaction.
How do you see loan disbursals in the current year?
We plan to disburse loans worth Rs 17,000 crore this year. Last quarter, we disbursed around Rs 3,600 crore, roughly half of what we have disbursed in our lifetime before that. So, in terms of growth, it was 100% quarter on quarter. Around 40% of our borrowers are now repeat customers. The average ticket size of loans has gone up to around Rs 75,000.
How good are the spreads? Are you adding to your pool of lenders?
Right now, we have about seven to eight partners, including a couple of banks, and we are talking to a couple of large private sector banks. We make a spread of between 4% and 8% on loans, say if the IRR is 24% and depending on our collection performance, NPAs are around 5-6%.
How much capital do you have right now? And are you looking to raise funds?
We have around Rs 2,370 crore of unutilised capital which we feel should be sufficient to fund our losses and to spend on hardware and technology. We lose around Rs 30 crore per month, so this will keep us going for 70 months. However, we hope to become profitable in nine months. If there is a public-market investor who is willing to invest in the last round before the IPO, we will get him and get some early investors to exit in a secondary transaction. We are hoping to do the IPO probably in Q1FY25.
How is acquisition of multi-brand loyalty platform Payback India working out?
There are 110 million consumers who earn points at various retail partners and we make a transaction fee. So, that business typically grows at 15-20% annually. Payback is profitable, on revenues of around Rs 120 crore, it makes a profit of about Rs 20 crore.
How are you using Payback to grow your core business?
We are trying to see how we use 110 million consumers on Payback and create a specific product for shopkeepers where they offer vouchers and gift cards to consumers to transact at their stores for the first time. The idea is to connect 8 million shopkeepers with 110 million consumers and enable transactions. We make a small transaction fee, so it’s is a win-win because the merchant is getting a customer.
How is the POS machine business doing?
We did revenues of around Rs 175-200 crore last year and this year we will close at roughly Rs 320-350 crore. Last year, it was loss-making, but we will definitely end the year profitably.
How is the foray into consumer credit with PostPe going?
It has scaled better than we thought. We had an internal goalpost of Rs 1,000 crore TPV by September and we did Rs 700 crore last month. It is still loss-making by about Rs 3-4 crore a month, purely on customer acquisition costs. On the operating metrics, we make money. At present, we have just one million consumers, but unless you have 20-25 million consumers, it is not a great business. So we will continue to invest in this with the profits from the merchant business.