Online lending platform CoinTribe has raised $3 million in pre-Series A and the 90-member team is aiming to build a loan book size of Rs 600 crore by the end of the fiscal year 2018.
It’s not every day that management consultants leave well-cushioned jobs to start up.
But 41-year-old Amit Sachdev and 33-year-old Rohit Lohia were keen to bridge the financing gap in small and medium enterprises.
An IIM- Lucknow and IIT Varanasi graduate, Amit had been a career strategy consultant throughout. At Boston Consulting Group he advised banks, NBFCs, as well as Asset Management Companies on issues involving business strategy, transformation, digital strategy, operational improvements, and risk management. Rohit worked as a Project Leader at BCG before enterprising with a vertical e-commerce portal, IndiaInMyBag, which focused on creating a platform for weavers and artisans engaged in traditional craft in 2013.
Explaining their concept over a call, Amit says,
“There is still a huge gap in the SME unsecured loan segment. There are three private banks, which haven’t entered this unsecured segment. A platform like ours tying up with them means introducing new banking capital to this space.”
Conceived in May 2015, their enterprise, CoinTribe, is a loan marketplace focused sharply on Micro-Small Medium Enterprises (MSMEs). The model facilitates not just loan or lead generation for banks, but also assesses a customer’s credit risk through proprietary underwriting engines and provides suitable suggestions.
The startup looks at mainly providing standardised business loans. The company’s website does mention personal loans, but that’s not a focus area. However, the founders claim they have banking partnerships to cater to requests raised on the platform. CoinTribe has tied up with six NBFCs and banks to give out loans to businesses.
Unlike most players, CoinTribe doesn’t want to become a Non-Banking Financial Company (NBFC). Players like CapitalFloat and InCred - with NBFC licenses – are operating presently with a similar marketplace model.
But why is CoinTribe staying away from the NBFC route?
Because being an NBFC not just allows entities to be flexible to deploy their own capital, but also results in higher commissions from loans disbursed.
Amit bets on the fact that NBFCs might be looking at higher commissions because their cost of raising lending capital is significantly higher.
Citing figures, he says the cost of raising capital is 6-7 percent for loan marketplaces like CoinTribe while it can be as high as 12-15 percent for NBFCs (like CapitalFloat).
This makes the total interest at which the loan is borrowed extremely high, acting as a barrier rather than enabler.
Including all costs of operations, predictive NPAs (non-performing assets) and margins, CoinTribe gives unsecured business loans at interest rates ranging from 16 to 21 percent. But the average interest rate by portfolio is 19 percent.
The founding duo states that their platform has facilitated disbursal of loans worth more than Rs 225 crores while claiming to be deploying loans worth Rs 35 crores every month.
CoinTribe presently claims to have an active loan book of Rs 75-80 crore, and the company receives revenues in two different ways. The first is through commissions received on every loan deployed. This can range between 4 to 6 percent for every loan deployed. They also gain from banks and other financial institutions that use CoinTribe’s underwriting algorithms to validate the credit worthiness of customers. A fee of Rs 2,000 per application underwritten is charged.
The firm has mapped their evolution across three stages.
The founders explain the first stage - between 2015 and July 2016 - was to design the right underwriting algorithm and build a robust backend.
The second stage kickstarted from August 2016 and included working with a small set of lending partners in long and short-term dealer financing.
At present, the firm claims to be in the growth, or third stage, where the objective is to scale up. The focus for CoinTribe at present is to see lead generations from the top 15 to 20 cities and go beyond that.
The Gurgaon-based firm has a strong presence in Delhi-NCR area and is now active in Mumbai.
CoinTribe is now also looking at exclusive partnerships with aggregators such as classified listing platforms for access to more customers.
In the coming fiscal, the startup plans to introduce newer products on the platform. This includes short-term loans, starting from one to 12 months. Apart from dealer loans, the firm will also enter the vendor financing space, personalising products according to their needs.
The 90-member CoinTribe team is confident of building a loan book size of Rs 600 crore by the end of fiscal year 2018, and reaching Rs 13,000 crore by the end of FY 22 for long term loans.
In 2016, the company raised a pre-Series A round of $3 million from Puneet Dalmia, Managing Director, Dalmia Bharat Group, who also served a sounding board for the founders before they started the business.
But Amit and Rohit aren’t the only co-founders of CoinTribe. A few months after starting up, they were joined by Manish Chaudhari, 39, now co-founder and Chief Risk Officer of the company.
Amit states, “We met more than 18 senior people who were managing risk in various organisations before we finally ran into Manish. He was the perfect fit for our business.”
Manish brings to the table 14 years of experience in credit underwriting and portfolio risk management, and has worked with ICICI Bank, Standard Chartered Bank, GE Money and Cholamandalam Finance.
Apart from the NBFC lending startups mentioned above, there are a host of lending startups and NBFCs operating in the country. The lending space has multiple models, including lead generators like BankBazaar and NBFCs like LendingKart. According to YourStory Research, in 2016, lending startups raised $343 million in funding.
CoinTribe competes directly with Kalaari-funded financial marketplace Rubique, but the founders claim their underwriting capabilities set them apart.
With multiple other players in the playing field, the distribution network for banks and other financial lending institutions is getting stronger. But it may well be a double-edged sword. In the race to get everyone in on the lending game (from businesses to blue-collar workers), these startups might also build up irrecoverable loans for financial entities.
In FY 2018, CoinTribe plans a push to create strong partnerships that will help reach more SMEs effectively.
The founders are “cautious in their portfolio growth and continue to believe that long-term success in SME lending will come from good risk assessment”.