The travel agency sector has long been blacklisted by NBFCs and banks, with lending institutions dithering in providing loans to travel agencies owing to high default rates.
The perception about the industry, however, seems to be changing.
The emergence of tech-driven lending marketplaces such as Indifi Technologies is playing a pivotal role in the growth of ‘working capital’-starved SMEs.
It’s a managed marketplace that connects micro and small enterprises to potential debt financiers and claims to solve ‘access to capital’ issues for SMEs in travel as well as hotels, restaurants and retail amongst others.
“We have been able to reestablish the faith of lenders in the travel sector,” said Alok Mittal, CEO and co-founder, Indifi Technologies.
Interestingly, when Mittal started the company in 2015, he began with a travel vertical as securing working capital in travel business was sort of a cumbersome affair. Now, the online lending platform offers different kinds of loans to travel agencies such as working capital loans, bulk bookings, and corporate client loans, among others.
The platform later added other segments such as hotels, restaurants, retail, e-commerce and used car dealers.
With a total number of 10 NBFCs and banks including YES Bank, RBL, Edelweiss, IndiaInfoline, Capital First and Aditya Birla Finance, Indifi has a strong funnel for lenders across different business verticals.
According to Indifi Technologies, the loan requirement for businesses varies from Rs 1 lakh to 50 lakh with an average ticket size of Rs 5 lakh. So far, the platform claims to have disbursed over a couple of hundred crore rupees worth of loans to over 3,500 businesses.
Besides connecting borrowers and lenders, the platform claims to hand-hold both during the entire lifecycle of loans.
Indifi’s secret: Hand-holding lenders and borrowers
“We have devised an end-to-end process for evaluating loan disbursal for any particular company across the aforementioned verticals. The product design and loan criteria are based on factors such as size of the business, performance, segment and requirements,” said Mittal.
He pointed out that the urge of debt for a travel agency is different from a restaurant. Explaining further, Mittal outlines, “An e-commerce platform will require loans for a completely different purpose than a hotel. Thus, it is important to have the right product for the right kind of business. In this way, the platform cracks the problem for lenders and borrowers as well.
Traditionally, hedging risk is one of the key concerns for lenders. However, Indifi also claims to cover this aspect through the power of data.
“During the lifecycle of a loan, profile of borrowers tend to fluctuate. The data stream we have built help us understand the condition of borrowers and take corrective measures before the loans turn south,” said Mittal.
Built on foundation of services and partnership
Through a full stack model, the platform offers a win-win deal for lenders and businesses. When it comes to churning revenue, Indifi Technologies charges commission from funders for its product line and services.
In terms of lending partners, Indifi has partnered with B2B lenders in the travel space, such as TBO Group and Riya including Makemytrip, goibobo, DJUBO and Yatra.
“Our partners help in finding right customers who have the requirement of loans. For instance, Makemytrip, with due permission from partner hotels, provides us data which helps us to understand the business and take a decision on underwriting loans,” said Mittal.
Indifi’s delight: India Stack, GST & cashless economy
Before donning the entrepreneurial hat, Mittal was partner at VC firm Canaan Partners (acquired by Goldman Sach). “I dabbled around various ideas but ended up with solving the pain of ‘working capital access’ for SMEs,” adds Mittal.
According to him, the online lending sector is estimated to be worth $300 billion and holds immense opportunity for lenders in making money while developing infrastructure.
The growth of India Stack, rising pitch for GST and growing cashless economy are paving the way for tech-oriented intermediaries such as Indifi.
The platform adopts an amalgamation of data and technology to build various loan designs and criteria for respective businesses.
Mittal believes that as the India Stack model becomes more robust and SMEs data becomes more streamlined the business scope for Indifi will further increase.
High hopes from govt policy
During the interaction, he recounted finance minister Arun Jaitley’s budget speech. “The finance minister highlighted the role the online lending sector played in supporting the small business of the country. The government further showed faith in the sector.”
In his view, the government will smoothen up the policy to push forward the online lending sector in the country. “This will give a boost to our business when we are planning to expand the scope of offerings in other sectors as well.”