Most investors in India are presented with opportunities such as fixed deposits, small savings accounts, mutual funds, stock markets and even cryptocurrency. While market-linked investment options have a component of volatility and must have an appropriate allocation in the portfolio, the fixed income options don’t always offer real inflation-adjusted returns. So, investors aren’t left with many options to build a healthy diversified investment portfolio. New age investment platform Grip Invest is providing investors with an opportunity to diversify their portfolio by allowing them to access high-yield, fixed income products like lease financing or inventory financing.
In an e-mail interaction with FE Online, Nikhil Aggarwal, Founder and CEO, Grip Invest shares details about the investment platform and the associated risks. Excerpts:
What is Grip Invest and what it offers?
Grip Invest is a new-age investment platform that aims to act as a marketplace for a) investors looking to diversify their investment portfolio by investing in higher yield, asset-backed opportunities, and b) companies looking to leverage lease financing and access new forms of capital.
Grip Invest started operations amidst the pandemic in 2020 and offered lease financing as a product. We present an opportunity for investors to co-invest money in leasing assets – such as electric vehicles, furniture, EV batteries, cloud kitchen equipment, etc. – through our platform. This would further enable those companies to grow without raising equity or debt but using leasing as a form of growth capital. The investors on the other hand get fixed monthly returns.
Covid pandemic has forced companies to shutdown offices. Many companies are now planning to adopt a hybrid work model. Under these circumstances, what is the growth potential of funds invested through Grip Invest?
While Covid has thrown up many challenges it has also created many opportunities. With many companies looking at a hybrid model, co-working spaces have become more in demand. They allow companies to scale up and down seats as required. Co-working spaces are ideal candidates for deployment of funds invested through Grip as they work on asset-light models and a co-working space provider needs to quickly scale their presence.
Another example is last mile delivery – Covid has increased ecommerce as well as the hyperlocal delivery segment. This has resulted in an increased requirement for capex across the value chain – more warehouses, more third-party logistics fleet, more last mile delivery fleet etc. This has resulted in a huge opportunity for Grip.
Lastly, the growing adoption of EV has created a large deployment opportunity for Grip. In the next 10 years, new OEMs will need manufacturing machines, operators will need fleet and there will be new charging equipment that is deployment across the country.
At a time when there are some may easy investment avenues like mutual funds, and even crypto, why should people invest through Grip Invest?
If there is one investment principle that 99.9% of people agree with, it’s that a diversified portfolio is good. Each investment serves its own purpose and investors should choose a combination that works best for their risk-return appetite.
Mutual funds and crypto have become especially popular due to (a) small minimum transaction sizes allowing everyone to participate (b) simplified digital investment experience and portfolio management.
Unfortunately, the same has not happened for other alternative asset categories especially in the fixed income space. Both mutual funds and crypto are market-linked instruments with high volatility. Grip is making such high yield fixed income investment options available to investors by solving both – low minimum ticket size and great user experience. Investors should also look to and not only invest in such opportunities to build a healthier and more diversified investment portfolio.
What are the risks linked to investing through Grip invest?
The biggest risk for the investor is that two events happen simultaneously – (a) the company leasing the asset defaults on its payments and (b) the asset being leased cannot be recovered and monetized to recover value. As both events have to happen for investors to lose capital, the probability of capital loss is reduced. This is significantly different from unsecured corporate lending (like invoice discounting) or P2P loans where the financing is not backed by any recoverable asset.
To further protect investors and mitigate the risk of default, Grip takes the following steps for each transaction:
Identify assets and companies for investment and construct deals with leasing partners that meet our financial and risk criteria. One of our key criteria is that the company must have a well-regarded PE/ VC investor, this ensures high standards of corporate governance
Take a 7.5%-15% security deposit at the beginning of the transaction.
Ensure accelerated monthly repayments such that 40-50% of the investor’s capital is returned within the first 12 months of the investment.
Monitoring of the investment over the tenure and review of the lessees financial and operating performance.
Built an ecosystem of parts for recovery of the assets, re-sale, or re-lease. We have 70+ leasing partners and infact have our own ecosystem to re-lease the assets
We have already returned 26+ Cr in investments to our users and not had a single default till date.
Our product is currently available for resident and non-resident Indians. We’re targeting investors, particularly from middle and upper-middle class income groups, looking to balance their portfolio. Investors can invest as low as INR 20,000 through our platform.
Do you provide any guarantee/security for the invested fund?
Grip Invest educates its customers on the various opportunities that leasing and inventory financing hold for them. However, the ultimate decision to invest remains in the hands of the investors. We do not make any decisions or offer any guarantee. We offer a platform where investors can come, assess the opportunities, and make investment decisions.
What is the return one can expect on investing through Grip invest? Is it assured?
Our investors can invest as minimum as INR 20,000 for a pre-tax IRR of 20%+. Another way to look at the returns is that if they were to keep their money invested in assets on Grip, they would have a pre-tax annual yield of 20%.
Every investment opportunity we curate and present on our platform offers different returns. Before proceeding, investors can view detailed information about all the active leasing opportunities. They also have the option to calculate the returns they would receive on a particular investment.
Is it legal to invest through Grip Invest?
Yes, it is legal to invest through Grip. We have taken opinion from some of India’s best known law firms on the investment structure and the regulations governing our business. In fact people from the legal and CA profession are some of our largest customer bases!
How many people have invested through Grip Invest? And, how much amount has been invested?
The last 15 months have been an incredible journey for Grip Invest. We built a community of 150,000+ investors (consisting of resident and non-resident Indians), making investments from 322 cities in 42 countries globally. Moreover, we’ve facilitated the leasing of assets worth INR 150 crore.