<p>Flushed with the recent infusion of capital from British International Investment (BII), the Bengaluru-based fintech company in the business of lending to small enterprises, finds itself well poised to take on the rising credit needs of its target market. In a tete-a-tete with <em>DH</em>’s Shakshi Jain, the firm’s founder and chief executive, Hardika Shah unravels her plans for its future and her outlook for the micro, small and medium enterprises (MSMEs) in FY24.</p>.<p><strong>How has demand for credit been this year, especially transitioning out of the pandemic?</strong></p>.<p>Demand is back with a roar. From (a) demand perspective everybody is back to business - shopping, buying, using, consuming - which is great for MSMEs, because that’s where their demand comes from. Whether you’re a trader or manufacturer it all trickles down from consumer demand. I think right after the pandemic the pent up demand and of course India’s GDP being at 6-7 per cent has been such a big driver.</p>.<p><strong>How has the year been for Kinara?</strong></p>.<p>It’s been great for us. This year we closed two rounds of equity (funding) , back-to-back, one in the first quarter and another in the second quarter, (raising) roughly Rs 200 crore each. Given the talk of a funding winter this year, our being able to raise this kind of capital - $55 million – goes to demonstrate that everybody – (be it) new investors, large investors or the British government – sees us as solid business. In March we were at Rs 1,267 crore AUM (asset under management). Now we’re already close to Rs 1,900 crore. We plan to reach an AUM of Rs 6,000 crore by 2025.</p>.<p><strong>How do you plan to use this capital?</strong></p>.<p>We’ve built discounting or supply chain finance products, which involved a lot of tech. So we used some of the capital to build our tech. We will start thinking about geographic expansion next year and that process will begin in the next couple of months. We’ve been in six states for some time. We’ll find a way to go to one or two other states.</p>.<p><strong>Could you walk us through the collateral-free loan procedure at Kinara?</strong></p>.<p>So, 90 per cent of our origination happens through our loan officers in the field. We’ve 125 branches. Loan officers cover 30 kilometres (radius) from the branch, to source (clients). The balance 10 per cent comes from online/digital loans. One part (of the work) is data collection with KYC, bank statements and, if you have GST, then GST. And then, we have data science models we’ve built for our customer segment over the last 10 years. Our models look at how to assess the risk of that customer, including credit bureau and fraud checks, sanction lists. Essentially the decision is two-part. One is (whether to) give the loan or not.</p>.<p>The other part is what is the best loan I can give you - at which point, a person on the field, a risk officer, will visit. And the risk officer’s role is to validate all of the data that either the customer has entered or the loan officer has collected. The disbursement is all fully digital. The whole process only takes two days, even with these interactions.</p>.<p><strong>Have the recent interest rate hikes impacted borrowing in the MSME sector?</strong></p>.<p>Right now the demand is very, very high. There’s a lot of pent up demand. So, I don’t see the impact in that kind of straight line. A business needs capital to run. Demand is very, very high and unmet.</p>.<p>At the end of the day, the business will pass on the cost to their buyers and the buyer will pass on the cost to you and me as consumers and we will pay. So, I don’t see that affecting the business segment much.</p>.<p><strong>Any plans afoot for the next round of funding?</strong></p>.<p>Absolutely. We’re an NBFC, right? So, I tell my team we’re one year on, one year off.</p>.<p>One year you raise funding, you give yourself a break for a year and then you start the process to raise funding again. So, yeah of course, we’ll start again, probably mid-year next year.</p>.<p><strong>What are your thoughts on going public/getting listed?</strong></p>.<p>It’s definitely an aspiration for most companies and we’re no different. But we recognise that for us to get there, we’re still three years out. As a retail NBFC, we need to be beyond an AUM of Rs 6,000 crore, and then who knows at that point, the (prevailing) market conditions and other factors at play.</p>.<p><strong>What triggers defaults by the MSME sector - bad intent or inability to pay?</strong></p>.<p>Lack of intent is very, very low. It doesn’t happen, surely. We’ve done 70,000-80,000 loans over the course of 10 years. I would definitely say there will be some who are outright there to game the system but they are very few. </p>.<p>The ability to not pay has happened often due to macro events beyond their control.</p>
<p>Flushed with the recent infusion of capital from British International Investment (BII), the Bengaluru-based fintech company in the business of lending to small enterprises, finds itself well poised to take on the rising credit needs of its target market. In a tete-a-tete with <em>DH</em>’s Shakshi Jain, the firm’s founder and chief executive, Hardika Shah unravels her plans for its future and her outlook for the micro, small and medium enterprises (MSMEs) in FY24.</p>.<p><strong>How has demand for credit been this year, especially transitioning out of the pandemic?</strong></p>.<p>Demand is back with a roar. From (a) demand perspective everybody is back to business - shopping, buying, using, consuming - which is great for MSMEs, because that’s where their demand comes from. Whether you’re a trader or manufacturer it all trickles down from consumer demand. I think right after the pandemic the pent up demand and of course India’s GDP being at 6-7 per cent has been such a big driver.</p>.<p><strong>How has the year been for Kinara?</strong></p>.<p>It’s been great for us. This year we closed two rounds of equity (funding) , back-to-back, one in the first quarter and another in the second quarter, (raising) roughly Rs 200 crore each. Given the talk of a funding winter this year, our being able to raise this kind of capital - $55 million – goes to demonstrate that everybody – (be it) new investors, large investors or the British government – sees us as solid business. In March we were at Rs 1,267 crore AUM (asset under management). Now we’re already close to Rs 1,900 crore. We plan to reach an AUM of Rs 6,000 crore by 2025.</p>.<p><strong>How do you plan to use this capital?</strong></p>.<p>We’ve built discounting or supply chain finance products, which involved a lot of tech. So we used some of the capital to build our tech. We will start thinking about geographic expansion next year and that process will begin in the next couple of months. We’ve been in six states for some time. We’ll find a way to go to one or two other states.</p>.<p><strong>Could you walk us through the collateral-free loan procedure at Kinara?</strong></p>.<p>So, 90 per cent of our origination happens through our loan officers in the field. We’ve 125 branches. Loan officers cover 30 kilometres (radius) from the branch, to source (clients). The balance 10 per cent comes from online/digital loans. One part (of the work) is data collection with KYC, bank statements and, if you have GST, then GST. And then, we have data science models we’ve built for our customer segment over the last 10 years. Our models look at how to assess the risk of that customer, including credit bureau and fraud checks, sanction lists. Essentially the decision is two-part. One is (whether to) give the loan or not.</p>.<p>The other part is what is the best loan I can give you - at which point, a person on the field, a risk officer, will visit. And the risk officer’s role is to validate all of the data that either the customer has entered or the loan officer has collected. The disbursement is all fully digital. The whole process only takes two days, even with these interactions.</p>.<p><strong>Have the recent interest rate hikes impacted borrowing in the MSME sector?</strong></p>.<p>Right now the demand is very, very high. There’s a lot of pent up demand. So, I don’t see the impact in that kind of straight line. A business needs capital to run. Demand is very, very high and unmet.</p>.<p>At the end of the day, the business will pass on the cost to their buyers and the buyer will pass on the cost to you and me as consumers and we will pay. So, I don’t see that affecting the business segment much.</p>.<p><strong>Any plans afoot for the next round of funding?</strong></p>.<p>Absolutely. We’re an NBFC, right? So, I tell my team we’re one year on, one year off.</p>.<p>One year you raise funding, you give yourself a break for a year and then you start the process to raise funding again. So, yeah of course, we’ll start again, probably mid-year next year.</p>.<p><strong>What are your thoughts on going public/getting listed?</strong></p>.<p>It’s definitely an aspiration for most companies and we’re no different. But we recognise that for us to get there, we’re still three years out. As a retail NBFC, we need to be beyond an AUM of Rs 6,000 crore, and then who knows at that point, the (prevailing) market conditions and other factors at play.</p>.<p><strong>What triggers defaults by the MSME sector - bad intent or inability to pay?</strong></p>.<p>Lack of intent is very, very low. It doesn’t happen, surely. We’ve done 70,000-80,000 loans over the course of 10 years. I would definitely say there will be some who are outright there to game the system but they are very few. </p>.<p>The ability to not pay has happened often due to macro events beyond their control.</p>