Fintech firm Flexiloans aims for Rs 5,000 cr disbursement this yr

India remains a capital-starved country with most MSMEs still are not able to get lending support from formal financial institutions. However, things are slowly changing for better. Many fintech have emerged in the last one decade, which are aggressively lending to MSMEs through various innovative lending instruments. Leveraging technology, the process becomes easy and faster for the micro and small business, which are otherwise not able to get loans from banks and large NBFCs. Flexiloans is one such new age fintech that has actively supporting the MSME ecosystem through its various lending products.

In a conversation with the Bizz Buzz, company’s co-founder, Manish Lunia said that the company is providing loans to those deserving MSMEs, which remain under-served by the banking system. The company manages more than Rs 1,850 crore of AUM and has an annual disbursement run rate of over Rs 4,000 crore to more than 15 lakh registered users. It has already disbursed more than 1 lakh loans to various MSMEs in the country. By the end of this year, it aims to hit an annualized disbursal of Rs 5,000 crore. He said that there is so much space for growth for every financial player in the MSME lending space. As the Indian economy grows, the lending needs of MSMEs will grow in coming years, giving a huge space to grow, Lunia said. Flexiloans, which is backed by financial sector veteran like Sanjay Nayar, is planning to raise capital in the coming quarters for funding its expansion plans

Can you give a brief overview about the operations of Flexiloans? Why did you decided to start a platform like Flexiloans? Please throw some light on company’s initial journey.

We started Flexiloansin 2016. We all three cofounders went to ISB, Hyderabad in 2008-09 and knew each other quite well. So, in 2015, we decided to set up this company when we saw there was great opportunity in the finance space. That time, the JAM (Jan Dhan, Aadhaar and mobile) was taking up. Also, there was a lot of NPA (non-performing assets) seen in the banking system. Due to this, young business men were not able to get credit from the banking system. Also, we all three cofounders are Chartered Accountants and we saw that micro and small enterprises were struggling to get loans. These are the motivations behind starting Flexiloans. Why can’t we go to the platform where SMEs are listed like ecommerce? Why can’t we use technology to process their files? Similarly, we can use various forms of underwriting like cash flow-based underwriting and can use technology for diversification and reach various parts of the country. These are four pillars based on which we started Flexiloans.

Within six months of starting Flexiloans, we had the opportunity of partnering with Ola, Uber, Snapdeal, and ShopClues. Then, we met with our mentor, Sanjay Nayar (Former KKR India head) and told our story. After a couple of interactions, he along with couple of his friends, decided to invest in our company. We raised one of the largest seed fund rounds of Asia at that point of time with a commitment of Rs 100 crore. By 2018-19, we were among the top lending platforms partnering with almost all ecommerce players. During 2017-18, factors like demonetisation, implementation of GST and others worked as a tailwind for us. Many PoSplayers started to come up and they partnered with us to give loans to merchants. Flipkart and Amazon also joined us. Slowly we saw that many people were coming to our platform on their own. Then, we started doing digital marketing and were receiving around 10,000 leads every day in 2018.

How has been the growth journey so far? Can you give some view on the total AUM managed by the company? What kind of growth expectations do you have in the current financial year?

As of today, we get around 4 lakh people applying to us on a monthly basis. Today, we are a leading partnership-led ecosystem. Almost all e-commerce ecosystem, and payment ecosystem like PhonePe, Google Pay and Paytm among others; have partnered with us. So, we have more than 100 partnerships as of now and we are the second largest MSME platform in the country because of the number of leads we get. We manage around Rs 1,850 crore of AUM (asset under management) as on date and we are disbursing loans of around Rs 300 crore-Rs 400 crore per month. We have given around 1 lakh loans so far. We aim to grow 40-50 per cent this year. Beyond Sanjay Nayar, there are luminaries like Siddharth Parekh (son of Deepak Parekh and PE fund owner),Gopal Srinivasan (Chairman and Managing Director of TVS Capital), and Falguni Nayar (Founder & CEO of Nykaa) among others have invested in the company on individual capacity. We also have two institutional investors, which have invested in us.

How many banks and NBFC have been lending to you as of now?

We have more than 20 lending partners as of now including IndusInd Bank, IDFC Bank,Kotak Mahindra Bank, RBL Bank, and many others. The idea is to make an institutional background which work well.

We have seen traditional banks and NBFCs are also going aggressive on the MSME lending space. How do you view the rising competition?

India is growing at 13-14 per cent at a nominal rate. As that is the case, financial market always grows faster as money multiplier. So, there is huge demand and in the financial services space, there is no winner takes all kind of thing. In India, there are around 10 crore MSMEs. As per data of various credit bureaus, only 4.5 crore of MSMEs have ever taken a loan. Also, live MSMEs, which have a credit line available from any lender is less than 1 crore. So, less than 10 per cent of MSMEs have any loan from any bank or any other financial institution in the country. So, the idea is to work with deserving and under-served MSMEs in the country and we are working in that direction. We provide less than Rs 10 lakh loans to MSMEs and 70 per cent of our business is concentrated in tier-II and tier-III cities and beyond. These are the MSMEs, which most banks are not touching. Our USP is to disburse loan within 24-48 hours. Most people don’t get 30-40 days to get a loan in this segment from other lenders. Due to our digital mode of application submission to disbursal, MSMEs prefer us. Banks don’t compete with us, rather they partner with us. We do a lot of co-lending with banks. About 40-50 per cent of our book is co-lending.

Are you profitable as an entity? Can you throw some light into the aspect of fund raising?

In the last two years, we have turned profitable. We will expand that in the current fiscal year. We are fairly comfortable as far as capital is concerned. But you need capital, every time you expand. So, there can be some fund raising, which will be a combination of equity and debt.