Micro, small and medium enterprises (MSMEs), like Sai Shrusthi, are crucial engine for growth of the Indian economy. Nearly 50% of MSMEs still lack access to formal credit, making financial inclusion a core priority. And the major reasons for this huge credit gap are lack of collateral, insufficient or lack of credit history and informal nature of business and lengthy periods of approvals or disbursals for these working capital-intensive businesses. Early into their entrepreneurial venture when they founded the digital payments processing firm, Venture Infotek in the mid-1990s, Mr. Dhruv Khaitan and Mr. Piyush Khaitan, understood the deeper pain points of retailers when it comes to accessing finance. They observed that more than 60% of retailers, even though credit-worthy, were denied finance based on traditional underwriting methods. Thus, going beyond the bipartisan business approach, the Khaitan brothers divested their stake in Venture Infotek in favour of a European MNC in 2010 and soon started a new chapter in the credit space for Indian SME and MSME retailers with NeoGrowth in 2011-12. The company unleashed a revolutionary model for SME and MSME retailers by giving them loans against card swipes using point-of-sale (POS) terminals.
Facts & Figures
2013 First Loan Disbursed 14,000+ Customers 70% Renewal Rate 1,300 Cr+ AUM
850+ Employee Strength 600+ Channel Partners 27 Cities Serving
Product Design & Uniqueness
NeoGrowth’s product design is centred around the business model of the retailers as card swipes give a good sense of the business potential, seasonality changes and customer footfalls for underwriting. Another differentiating factor is that this product has a daily recovery model and is digitally driven. The company can be described as a true ‘Digital Lender’ which provides loans to consumer facing, retail oriented, under-served MSMEs through a pioneering model that enables automated, hassle-free, daily, digital repayments for the customers. As its key product, the company offers an innovative loan product, i.e. loans against future digital sales (credit/debit card, online and digital sales). The product, launched in 2012-13, has since then grown in popularity to give NeoGrowth a nation-wide footprint across 27 cities in India and customers across various industries such as restaurants, food and beverage outlets, apparel, consumer durable and footwear stores, petrol pumps, groceries, pharmacies, etc. NeoGrowth has products tailored for customer type and usage. During the last year, we have strengthened our offerings by launching new products namely Vendor Finance and Purchase Finance. These products provide supply chain finance to businesses who sell to or purchase goods or services from eligible large corporate entities.
Key Financials & Growth Strategy
With an average loan ticket size of INR 12 lakhs (and a maximum loan amount of INR 75 lakhs), the company has so far disbursed over INR 5,600 crore till Feb’20; the loan book as on 29th February 2020 stands at INR 1,373 crore. It has clocked INR 1,000 crore in AUM for FY2019 and has grown by over 60% since then. On an average, it has been growing at 50% year on year. Incredibly, since inception, NeoGrowth has touched the lives of over 70,000 customers. NeoGrowth has grown steadily over the last 7 years and has a proven profitable and sustainable business model. Naturally, the company’s financial performance and asset quality have grown consistently since inception. NeoGrowth is one of the very new NBFCS to post a profit (as early as 2016-17) of INR 5 crore in FY 2016-17. In continuation of its strategy of “Deeper, Wider and Newer”, NeoGrowth is now focusing on deepening its reach in existing cities through the core retail lending product to MSMEs.
Social Impact Mission
Creating a positive social impact through business activities has been one of the paramount objectives for which NeoGrowth was established and the impact is measured by an independent agency annually since past six years. The impact is measured in terms of job creation, lending to first generation entrepreneurs, improving credit scores, lending to growing businesses in Tier-II cities, fostering digitization and furthering financial inclusion. During FY2019, around 35% of the disbursals were towards first time borrowers, 23% towards business owners who did not hold formal education degrees and about 12% of loan advances were towards businesses that were run by women either as sole proprietors, partners or directors.
The high value that NeoGrowth has accreted for its customers can be gauged from the high repeat customer rate, asserting its role in the Indian society as a company with immense social impact and relevance. “NeoGrowth was established with the objective of creating a positive social impact through its business activities as one of its utmost priorities. And it is really heartening to see how we have come a long way in extending support to boost the financial lives of merchants belonging to the erstwhile underserved MSME segment. I humbly state that NeoGrowth has enabled an improvement in the credit history, financial inclusion for women entrepreneurs and overall business growth, resulting in job creation for many of its customers – hitherto under-served by the traditional banking channels. Besides, we continually stay invested in philanthropic initiatives for causes close to us and in these unprecedented times of COVID-19, we are strongly committed to extend our support to several charitable organisations.” says Dhruv Khaitan, Founder and Chairman of NeoGrowth.
COVID Relief Measures
Committed to creating positive social impact since 2013, NeoGrowth has extended their heartfelt support and commitment towards COVID-19 relief, wherein each employee at NeoGrowth has voluntarily contributed from their salary and incrementally NeoGrowth has contributed to the same as well. The founders are also donating a matching amount and hence we have successfully raised an amount of over INR 50 lakhs. This amount is being donated to around 15 selective charitable organisations and NGOs across India who are doing frontline work in distributing food, medicine and equipment to persons most affected including healthcare workers.
Amongst one of the selected NGOs is SEEDS (Sustainable Environment and Ecological Development Society) who are reaching out to vulnerable communities in the states of Bihar, Delhi, Karnataka, Kerala, Maharashtra, Odisha and Uttarakhand. The relief amount is being utilised to supply hygiene kits and food rations to marginalised families, old age homes and orphanages and providing financial and essential services support to the daily wage earners. Besides, NeoGrowth is also supporting SEEDS in their efforts to support the district administration for complementing and supplementing public health systems as well as helping the Government for establishment of temporary quarantine facilities, where needed. In these regions, besides supporting the elderly and children, SEEDS is taking some burden off frontline health workers by supplementing public health systems, supplying hygiene kits and supporting the establishment of temporary quarantine facilities. Few other notable NGOs supported by NeoGrowth include Goonj, Akshaya Patra Foundation, YUVA (Youth for Unity and Voluntary Action), Uday Foundation For Congenita Defects and Rare Blood Groups Trust, Good Neighbors India, etc.
Measures & Digital Initiatives for Customers
Despite not getting any relief on loan moratorium from lenders, NeoGrowth continues to support its customers in the times of COVID crisis. In continuity to our digital initiatives, we have enabled all modes of digital payments for our customers, so that they do not have to step out of their homes. Our customer support staff is operating at full capacity from their homes even during these times to ensure that our customers queries are well heard of. We understand that during these days of lockdown, our customers are facing challenges in managing their cashflows. In this regard, we have started a communication series for our customers on providing essential tips to them on how they can manage their cashflows more effectively and stay afloat. Besides, we are also allowing for opt-in basis repayments. Through our regular communications to customers, we are also keeping them aware of the various social engineering and phishing cyber-attacks post COVID.
Other Measures for Employees Well-Being
NeoGrowth has been recently recognized as ‘Great Place to Work’ demonstrating high performance and high trust culture at NeoGrowth. During these challenging times, we have taken several measures to ensure safety of our employees, including work from home option for all our workforce, providing regular sanitation and safety tips, advising on practising social distancing and introduced alternate ways of collaborating through digital modes to ensure continuity of business. We are also working with our vendors and partners to ensure compliant and robust business continuity plans are operationalised at their end as well.