‘Good portfolios are made during bad times; mistakes during good times’

Jescilia Karayamparmbil

MSME-focused SBFC has grown significantly in just three years. Today, the NBFC ’s Assets Under Management (AUM) stand at Rs 3,516 crore. Its total income for FY 2020 is Rs 445 crore. Aseem Dhru, Founder and CEO of SBFC (who was formerly with HDFC in a leadership position) in an interview with Free Press Journal’s and talks about the lending business and the way forward. Edited excerpts:

• Tell us about SBFC’s journey

India is a country of shopkeepers and small businesses. We have 65 million small businesses across India. Of that, only 8 per cent of them have access to any form of organised finance. There is a huge opportunity here.

After 20 years with HDFC Bank, I realised that there is a space which can be a good business model. Thus, I stepped out to start SBFC. SBFC wants to be a nationwide lender. Over three years now, we have a presence in 92 towns and 17 states with 120 branches. We will be launching in Bihar next month which will be the 18th state. Now, SBFC has an AUM of Rs 3,500 crore. Slowly, SBFC is taking grip and getting into the depths of the market segment.

• How much has COVID-19 and its subsequent lockdown impacted SBFC?

At the moment, 90-92 per cent of our portfolio is efficient. In the next three months’ time, we will be able to get back to pre-COVID-19 levels (that is 95 per cent efficiency which means around 5 per cent of NPAs).

• Where does the industry stand in the case of efficiency?

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At present, the system is still protected by the Central Bank. The numbers will shoot up when the protection runs out in the second half of next year (September 2022). Institutions with poor-lending quality will be hurt.

Under the emergency credit line, banks have disbursed Rs 2 trillion already. There is restructuring for individuals which was not there earlier which is more like an extended moratorium.

Not many businesses have shut shop but their cash flows are damaged. So, if their EMIs are reduced, then these businesses can bounce back. Many such schemes have helped the portfolio across the industry. At present, the system is still protected by the Central Bank. The numbers will shoot up when the protection runs out in the second half of next year (September 2022). Institutions with poor-lending quality will be hurt.

Under the emergency credit line, banks have disbursed Rs 2 trillion already. There is restructuring for individuals which was not there earlier which is more like an extended moratorium.

Not many businesses have shut shop but their cash flows are damaged. So, if their EMIs are reduced, then these businesses can bounce back. Many such schemes have helped the portfolio across the industry.

• Has SBFC made any provisions for NPAs?

In March 2020, (during the lockdown) before finalising the accounts, we realised that there will be a problem. So, we had identified the potential accounts then. As things stand today, we do not see the need to make further provisions.

• What are the new trends that have emerged due to COVID-19?

The trend that has emerged is that big businesses are gaining market share and smaller businesses are bearing the brunt.

The bigger cities are the worst affected. But for small towns and cities, businesses attained normalcy very quickly.

• Will SBFC raise any capital from the market?

While portfolio challenges have to be managed, demand has come back to the economy much faster.

Good portfolios are made during bad times and mistakes are made during good times. Right now, we are bullish about the loan underwriting that we are doing at the movement.

Last month, we did an all-time high in the case of monthly disbursement at Rs 125 crore. It is business as usual. So, raising equity and raising bank finance will keep happening.

• Will you be raising funds through the capital market?

At present, we have no such plan.

• What is your customer base?

Over a period of three years, we have

served over 1.5 lakh new customers. We add 15,000-20,000 customers every month.

We are still scratching the surface. The reality is that the opportunity in this business is very large. However, finding a good customer in this business is like finding a needle in a haystack. We are a secured lender (lending is secured by property or gold). So, it is difficult to find such customers.

• What is the future outlook for the institution?

At present, the focus is to lay the foundation and profitability model right. We do not want to scale up too quickly and make mistakes.

The focus will be on building a highquality book.

By FY 2023, we will be across all the states in India. We will be present in 300-400 towns from the present 90 cities and towns. So, we will go down that deep.

We do not plan to put lending targets as that usually leads lending companies to go astray.

• Are you looking at new products outside of MSMEs?

SBFC will remain focused on the MSME segment. In that segment, we will come out with many product variants.

We offer gold loans to these businesses. This has become a Rs 500 crore portfolio for us. Now, we have launched a new technology-driven gold loan in which we offer home delivery of gold loans. Two valuers go to the customers to measure the value of gold through an app and the loan is instantly disbursed. This product was launched two months back and it received a positive response. We launched it as a pilot in eight cities and we will be rolling it out in all other cities and towns too.

• Due to such products, has technology cost gone up?

Technology cost has come down due to the cloud and all these costs have moved into a variable basis. Smaller players have the advantage over larger legacy systems in such case.