Bengaluru-based digital finance company Capital Float is looking to expand its presence in the co-lending space and plans to originate 50% of its loan book from the marketplace model by the end of FY18, co-founders Sashank Rishyasringa and Gaurav Hinduja told Shritama Bose. The company targets a portfolio of `1,500 crore by March 2018, they said. Edited excerpts:
Tell us about the latest round of funding.
Sashank: We’ve just closed a Series C equity funding of $45 million. The round was led by Ribbit Capital, a Silicon Valley-based fintech investor, while existing investors SAIF (partners), Sequoia (Capital) and Creation Investments significantly participated in the round as well. In addition to $45 million in equity, we have over the last one year also raised $67 million in debt from banks and NBFCs (non-banking financial companies). This takes the total funds raised by the company since the previous round to $112 million, equity plus debt.
What kind of loan growth did you see in the last year?
Sashank: We witnessed the best growth in three areas over the last year. Just in terms of the sheer scale, we have increased our portfolio 4x and our loan disbursements 10x over the last year. The second area was in terms of new and innovative products. We’ve widened our portfolio to six to seven segments and we’ve recently forayed into the kirana finance space, where we are giving loans as low as `25,000 to the smallest kirana stores over a mobile phone. A third area of progress has been the launch of our hybrid marketplace model. So we lend off our balance sheet, but now we also have lending partnerships with several banks and NBFCs, where they are able to deploy capital as well through our platform.
In the marketplace model, who is responsible for risk assessment?
Sashank: We acquire the customer, we analyse their cases, we come up with a risk assessment and share that with financial institutions on the basis of which banks do their own decision making and we co-originate the loan with pre-agreed-upon ratios.
What is your growth strategy for FY18?
Gaurav: Our focus for the year is to grow our share in the business and also increase our geographical footprint. Currently, we have a book size of about `700 crore. This represents a four-fold increase from this time last year, when it was `190 crore. Currently, about 35% of the book comes from the marketplace and the aim is to take that to 50% by the end of the financial year. We have roughly 15,000 customers being serviced at present. The idea is to double that to 30,000 by the end of the financial year. We are originating `200 crore worth of loans a month and by the end of the year, we’ll probably be doing `450 crore (a month). All our growth has come while maintaining the level of defaults at 2% and we aim to restrict it to that. We have customers in about 300 cities, with a major focus on tier-2 and tier-3 towns. We plan to end the year with customers in about 500 cities.
What share of your book would be loans to customers who are also eligible for bank loans?
Gaurav: We work to solve the problem of access as well as of experience. When it comes to access, we are the first lender on record for this borrower, even though in terms of experience, we may not be the first. Off the top of my head, I’d say around 30-40% of our customers were already having bank loans and for around 60-70% we are the first lender on record.
What would you expect from the long-awaited Reserve Bank of India guidelines for peer-to-peer (P2P) lenders?
Sashank: Generally speaking, we welcome any guidelines and innovations from the regulator that expand the base of capital that’s available for new-age platforms. One of the challenges currently is that while the banking system has several issues that it is looking to tackle internally, most new-age lenders are still reliant on the banking system. Any innovation that expands the sources of capital will be a positive for the sector.