Lending platform CASHe, owned by Bhanix Finance & Investment Ltd, ventured into the wealth management segment after acquiring mutual fund-focused fintech Sqrrl earlier this month. The Social Loan Company (TSLC) backed venture has been growing at a decent pace in the past five years but CASHe’s topline took a hit during the fiscal marred by COVID 19.
CASHe’s revenue from operations slipped around 21.3% to Rs 104.7 crore during FY21 from Rs 133 crore in FY20, as per its annual statements filed with the Registrar of Companies (RoC).
The fall in CASHe’s income is also surprising as most firms in the small ticket personal loan segment witnessed growth in FY21. This is also evident from CRIF’s credit landscape’s report which outlined 19% growth in the segment during the fiscal year ending March 2021.
CASHe provides millennial-focused credit products including personal loans with tenures of 2-12 months and ticket sizes between Rs 7k to Rs 3 Lakhs. The Mumbai-based company also provides credit lines and BNPL products in partnership with Myntra, Uber, and Amazon among others. The company claims to have disbursed loans of over Rs 4,000 crore across 1.1 million loans and has more than 20 million downloads on its application.
Instead of using conventional methods such as CIBIL or EXPERIAN score to check loan eligibility and credit worthiness of potential lenders, the CASHe uses TSLC’s proprietary artificial intelligence-driven scoring mechanism called “Social Loan Quotient”( SLQ). The lending company uses alternative data sources including smartphone metadata, social media footprint, education and monthly salary to assess the creditworthiness of each applicant to generate an SLQ score. Effectively, the SLQ score helps the firm evaluate ‘intent’ beyond just ability, as traditional lending scorecards do.
Interest on loans and advances is clearly the primary income driver for CASHe, accounting for around 81% of its total revenue from operations. These collections dropped by 23.4% to Rs 84.64 crore in FY21 from Rs 110.5 crore earned during the previous fiscal(FY20).
The company also charges fees on loan processing and other ancillary services which brought in Rs 19.2 crore during FY21, dropping by 13.7% from Rs 22.24 crore earned from the same in FY20. Importantly, income from the recovery of bad debts ballooned 3.5X YoY to Rs 86.1 Lakhs during the fiscal ended in March 2021.
Moving over to the expense sheet, we observed that CASHe booked around 22% of its annual expenditure under the provision for NPA. Along with the loans outstanding, this provision grew by 41.2% to Rs 21.8 crore in FY21 as compared to provisions of Rs 15.4 crore booked during FY20.
Importantly, the company incurred bad debts of Rs 19.4 crore (6.84% of the average outstanding loans) during FY21, which shot up nearly 5X as compared to bad debts of Rs 3.9 crore booked in FY20.
The company also benefited from the lowered coupon rates during 2020 and coupled with lower disbursals its finance costs dropped by 27.5% to Rs 20.4 crore in FY21 from Rs 28.1 crore in FY20.
During the same period, CASHe’ employee benefit payments (including contract employee emoluments) dropped by 50.5% to Rs 18.6 crore in FY21 from Rs 37.6 crore during FY20. This sudden drop is primarily because the company had spent Rs 18.3 crore on the employee stock option scheme and employee stock purchase plan during FY20 while no such payments were made in FY21.
Further, expenditure on verification and collections shrank 21.7% to Rs 11.42 crore while IT costs grew by 7.8% YoY to Rs 4.4 crore in FY21. During the period affected by COVID disruptions, the company controlled its customer acquisition operations and its advertisement costs grew by only 9.1% to Rs 7.9 crore in FY21 from Rs 7.23 crore spent during FY20.
Another Rs 39 lakhs were spent on lease rentals, pushing the annual expenditure to Rs 99.1 crore in FY21, dropping by 18.1% from Rs 121 crore during FY20. CASHe spent Rs 0.95 to earn a single rupee of revenue during the fiscal ended in March 2021.
While overall costs have been curtailed, the EBITDA margin of the company has dropped from 32.3% in FY20 to 28.22% during FY21. This coupled with reduced scale of operations has caused annual profits to reduce by nearly 51% to Rs 4.4 crore during FY21 from Rs 8.9 crore booked in FY20.
The size of CASHe’s loan book has grown by 36.5% to Rs 326 crore at the end of FY21 from its size of Rs 240.5 crore at the start of the year.
With a 2.5% (per month) interest rate on most of its loan products, CASHe operates at the riskier end of the market which is far more susceptible to upheavals. However, by limiting itself to smaller ticket items and tenures, the firm hedges its risks. That was clearly not enough in a year disrupted by the pandemic, but the firm will hope to put that behind it and return to a high growth path again.