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War on bad loans begins to pay for fintech lenders

The tough financial conditions have meant that startups are using technology innovatively to reduce the cost of operations.This year has been stressful for non-banking finance companies (NBFCs), with a liquidity squeeze affecting the broader finan...

, ET Bureau|
Updated: Nov 08, 2019, 01.42 PM IST
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Mounting losses force new-age lending companies to trim bad loans via tech, varied portfolio.
Bengaluru: Quite a few new-age fintech lending startups have reported profits or reduced losses in the previous financial year, data filed with the Registrar of Companies accessed via business intelligence platform Tofler showed, as they focused on trimming bad loans through innovative use of technology and diversified portfolios.

Lendingkart reported a profit of ₹34 crore last fiscal year, on revenue of ₹245 crore, while Aye Finance posted a profit of ₹25 crore, on revenue of ₹217 crore, a jump of 82% over the previous year, according to the data.

“With continuous business growth and learning from sanctioned loans, we note consistent improvements in our credit assessment technology platform. Our gross and net NPA stands at 1.09% and 0.55%, respectively, as of March 2019,” said Harshvardhan Lunia, chief executive officer, Lendingkart.

NPA, or non-performing asset, is a measure of the total amount of loans for which repayment has not happened on time.

“Owing to a deep-rooted analysis, we have not only been able to diversify our portfolio, but also control the NPAs (non-performing assets). We have been setting up branches in tier two markets and beyond, to help customers access lending facilities without being limited by a lack of internet knowledge,” said Sanjay Sharma, managing director, Aye Finance.

Mumbai-based Flexiloans reported revenue jumped to ₹25 crore, compared to ₹9 crore last year, although it incurred losses of ₹5.6 crore, widening from the ₹2.6 crore loss of a year ago.

“Last year, we focused on technology and data science-backed asset investments and digital customer acquisitions and saw a 10 times increase in monthly customer applications,” said Manish Lunia, cofounder, Flexiloans. “We work with a strong focus on unit economics.”

This year has been stressful for non-banking finance companies (NBFCs), with a liquidity squeeze affecting the broader financial services sector.

Additionally, with defaults at major lenders like DHFL (Dewan Housing Finance) and IL&FS (Infrastructure Leasing & Financial Services Limited), fintech NBFCs — which are much smaller in scale — have found it difficult to raise debt and equity funding on favourable terms, say industry insiders.

The tough financial conditions have meant that startups are using technology innovatively to reduce cost of operations and control the quality of their assets. Bengalurubased Moneytap said it had a net NPA level of less than 1% and had reduced its customer onboarding costs by more than 55%.

“The NBFC licence from the Reserve Bank of India will further help us strengthen our existing partnerships, through strong tech innovation and hybrid lending strategies,” said Anuj Kacker, cofounder, Moneytap.

Gurugram-based Indifi Technologies, which lends to small businesses, reported revenue of ₹13 crore, nearly doubling from last year, even as losses grew 34% to ₹21.5 crore, from ₹16 crore a year ago.
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