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Indifi Technologies, a lending platform for MSMEs (micro, small and medium enterprises), has secured Rs 290 crore in a series E round of funding led by ICICI Venture. Existing investors British International Investment, OP Finnfund Global Impact Fund, Omidyar Network India, Flourish Ventures and CX Partners also participated in the latest investment round.
The Gurgaon-based company plans to expand its operations and expand small businesses' access to working capital. “The core use of the funds will be in growth; in terms of serving customers over the next couple of years. There will be investments in new products, and in technology to ensure we improve the operating cost efficiency and risk discrimination,” said Alok Mittal, Indifi’s chief executive officer (CEO) and co-founder.
Founded by Mittal and Siddharth Mahanot in 2015, Indifi has more than Rs 1,500 crore as assets under management (AUM) and turned profitable in February 2022.
Indifi said it has disbursed over 73,000 loans worth more than Rs 4,100 crore in 400 Indian cities. “Most of our business involves micro and small (enterprises), and the turnover of the firm’s borrowers is typically between Rs 30-40 lakhs to Rs 10 crore per year. This funding round will give us the ability to deploy another Rs 4,000 crore in the market over the next couple of years,” said Mittal.
The company plans to launch more transactional-based financing products like MSME cards and supply chain financing in the next 6 to 12 months. It has been exploring new borrower segments and extending credit to direct-to-consumer (D2C) brands and software companies in the past six months. “We calibrate (the firm’s) expansion to the extent of digitisation in the country. As different borrower segments go through waves of digitisation, (we) make these credit facilities available to them on an ongoing basis,” noted Mittal.
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Close to 2 crore MSMEs have registered themselves on the Udyam portal, a registration platform under the MSME ministry.
More than 17 lakh micro-enterprises that had availed of credit under the centre’s Emergency Credit Line Guarantee Scheme (ECLGS) collapsed and turned into non-performing assets (NPAs) as of March 2023, according to per media reports.
“One of the core problems in MSME lending is delinquencies or bad loans, and that is why formal credit (channels) serve 15 per cent of the market whereas 85 per cent remains underserved. One of the key things required in a model like ours is to build models that can discriminate risks well,” said Mittal.
He explained that the company had customised its credit models with industry-specific overlays to differentiate risks associated with different industries. It operates a full-stack risk infrastructure which includes underwriting and loan account monitoring and has its staff for loan collections.
“I don’t think ECLGS affects the normal state of NPAs overall in the MSME industry but nevertheless improvements required in the underwriting are important for inclusion reasons and that is where our credit models are coming in,” he added.
The Reserve Bank of India (RBI) on June 8 announced its approval for the First Loss Default Guarantee (FLDG) framework, a credit-risk sharing agreement where up to 5 per cent of the default loan portfolio of banks and NBFCs (registered entities) is guaranteed by a third party such as a fintech or lending service provider (LSP).
“This is a great development in the interest of the market, in the interest of innovation around fintech products. As younger players enter the market who do not have a proven track record, having a loss default guarantee provides them with an easy way to get started and work with banks and NBFCs to be able to support that innovation. All the lender relationships on Indifi are without a first default loss guarantee as we have demonstrated risk performance to banks and NBFCs,” said Mittal.
