After Sudip Bandopadhyay, the current group chairman of Inditrade, took over the company in February 2016, he has been steering it away from equity broking, the cornerstone of the company while it existed as JRG Securities. Inditrade divested its equity broking business in May. Bandopadhyay is now placing his bets on the already flourishing agri-commodity financing business and providing a serious push to microfinance, affordable housing, and funding small merchants and entrepreneurs.
What’s interesting about his microfinance business is that it insists on lending only to women entrepreneurs in a bid to empower women across the country. Speaking to Fortune India, Bandopadhyay said his ultimate aim for the company was to become a small finance bank in five years. Edited excerpts:
You have clearly shifted gears from equity broking to agri-commodities and microfinance. How did that shift happen?
Our team’s focus was agri-commodity financing. We realised that there was a huge gap to be filled in the space. The company had its roots in Kerala, and Kerala is the land of commodities, especially agri-commodities. In the local trains of Mumbai, one can hear traders talking about stocks of companies, in Kerala, stocks are often replaced by commodities like rubber and pepper. The company already had a good commodities team. This was one of the reasons we bought JRG Securities. In November 2017, we bought the agri-business of Edelweiss and strengthened our position in this space.
We also wanted to get into microfinance. As soon as we acquired the business, we set up a subsidiary and applied for a licence. We got the licence from the RBI in March 2017 and launched the business in April 2017. And FY18, which was our first year of business, was very good. We disbursed about Rs 100 crore in loans, hit profitability and raised tier 2 capital. We ended the year with around 25 branches and over 30,000 customers.
We were clear that we were not interested in equity broking. After we divested the broking business in May, we decided to get into two other segments, affordable housing and financing micro entrepreneurs, which we call merchant cash advances (MCA).
Tell us some more about the merchant cash advances. How do they work?
We are looking to finance micro entrepreneurs, basically shopkeepers. So, anybody with a point of sale (PoS) system can avail credit. We look at the PoS sales and have certain checks and balances in place based on which we extend funding. For example, if a shopkeeper is making Rs 10,000 per day in sales on the PoS, then it is assumed that 10% of that figure, which is Rs 1,000, is the monthly profit; half of that, which is Rs 500, is pegged as his/her daily repayment capacity and funds are disbursed accordingly. There is a tripartite agreement with the shopkeeper and the PoS vendor; and the latter ensures that the daily repayment keeps coming in.
We launched in Mumbai in May; so far we have disbursed around Rs 5 crore loans through MCA. However, we are not looking to disburse large amounts this year, we will first look at developing the business in multiple markets and refine our risk management practices so that we are ready to garner volume in the next financial year.
On the housing finance front, when do you plan to launch and what are your targets?
For our housing finance arm, we have applied for a licence from the regulator–the National Housing Bank (NHB). We are hoping to get the licence by the end of September. So, we will be in a position to start the business in the second half of this financial year. Our disbursal target for this year is around Rs 40 crore.
You started the microfinance business last financial year. How has the performance been so far? And tell us why you focus only on women entrepreneurs?
We started this business just last year. For the first six-eight months, we did only about Rs 40-45 crore. Then we picked up the disbursals. We recently entered Kerala where we’ve done about Rs 1-1.5 crore. But in a month or so, that will pick up significantly. The initial period usually takes some time before picking up. We are on track to do cumulative business of around Rs 500 crore in microfinance this year. Currently, we are present in Maharashtra, Tamil Nadu, and Kerala. We will be launching in Orissa by July 15. In the second half of the financial year, we will be entering Madhya Pradesh, Rajasthan, and Chhattisgarh. We are also looking at eastern U.P. and northern Bihar as well, but it is at a very preliminary stage right now.
We fund only women entrepreneurs as we believe empowering women in smaller towns and villages with a loan to start a small business can do wonders. From women starting sari businesses to tiffin services across Maharashtra and Tamil Nadu, we seen so many women turn their lives around with just a little help in the form of funding.
What is your long-term vision for the company?
I think, ideally we should look at becoming a small finance bank as it fits in beautifully with what we want to do.