They had their first concall, here are my running notes from the same.
Opening remark:
- 1st investor call
- Key team- saurabh dhavan ceo, sahil sikka coo and cfo, abhishek mahajan cro, ankush agar chief experience officer
- Having worked with apl apollo and apollo pipes, lack of funding sme traders which restricts their growth
- One stock supply chain funding company
- 720 crs pure equity raise, 50% promoters and 50% other investors
- Initial target to address group channel partners, once this gets introduced here then other anchors and brands will be introduces
- Other than apollo, working with jsw, vedanta, tata group, oppo mobile, kajaria, havells etc
- Apl apollo tubes in covid started to stop credit, and instead of 1% cash discount to 2% cash discount, traders churned inventory 7-8 times, so this would give them 15-16% more v/s 9-10% of interest cost, so thats how apl apollo reduced debtor days
- Then a couple years later larger distributors stopped taking the discount as they werent able to raise cash using banks, so the group decided to tap into this
- Now 2000 cr loan book, 25-30 days repayment cycle
- 6000 cr loan book target till Fy27, ROA 4%, ROE 18-20%, NIM 6-6.5%
- 25-30% is groups own channels, and retailers associated with their own distributors, distributors 50-60k cr, retailers each do 5k cr or so, theyve also done large businesses, 12-13% interest rate for distributors but now as company is expanding to retailers this will also increase
- Infused other 450 crs in form of warrants last month
- 856 cr net worth, 720 infused initially, 1500 cr net worth by fy27, loan book at 2.2x times
- 35-40% exposure with be group and rest will be other groups
- Terms are fixed with large corporates, invoices flow from SAP of anchor to them, and direct financing happens to the large corporates only and not the distributor
- Large banks 9-11% and lower risk profiles, large nbfc aditya birla, tata capital 11-12% still lower risk profiles, new age corporates 13% , company will do at 11-13%
- Systems are aligned with income tax and gst portal
- Automated payments also done with hdfc axis
- Credit assessment model is a development ongoing for the software
- Plans to launch 24*7 banking from next year onwards
- 2500 cr loan book by end of year
- Current 1100 loan book??
- Started immediately post listing, wanted to maintain cg standards
- No CGs given by apl apollo and pipes for sg finserve
Participant discussion
- Asset quality how would it maintain, there are internal checks done, plus history, plus
- 35-40 target list of large anchor, eg tata motors itself runs 6000 cr financing
- 75 anchors by FY27
- Top down approach borrower, dealer of an anchor, MOU will be signed with an anchor with condition that based on their recommendation theyre lending to the dealer, and incase of default the anchor company will not supply to the dealer, and 5 years plus relationship of dealer and anchor and at least 50% of business from the anchor
- 30000 cr total worth of disbursements
- Minimum will be 3 years relationship, personal guarantees of promoter if incase proprietor then they take of wife and kids also, plus there are assets taken also as collateral
- On 1500 crs 13% direct, on 4500 5% spreads, ROA will be 4% and ROE 18%
- After finance cost employee and tech cost only
- Process of getting type-b/2 license from RBI hence the loan book was reduced, now that license acquired will run up again, provision is against standard asset only
- Business team responsible for collections, this is all timely, negligible overdue
- Underwriting 11 people collections 4 people total employee 64
- Future debt/equity will be 3:1, currently entire funding equity
- Previous credit rating was AA, withdrawn during license period, now will come back
- Quarterly disbursal run rate- 4000 crs per qtr, 5000 crs per qtr when 1500 crs
Disclosure- tracking not invested
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