In June of this year, ICICI Venture led a $35 million funding round for MSME lender Indifi Technologies. The recent investment was motivated by Indifi’s explosive growth, which during the previous fiscal year saw it more than double in size and close to Rs 200 crore.
According to its consolidated financial statements submitted to the Registrar of Companies, Indifi’s operating revenue increased 2.06X to Rs 198 crore during FY23 from Rs 96 crore in FY22.
For small businesses in the travel, hospitality, e-commerce, restaurant, trading, and retail industries that have trouble getting credit from banks, Indifi offers loans. The company claims that by March 2023, it had disbursed over 73,000 loans totaling Rs 4,100 crore across the nation, crossing Rs 1,500 crore AUM.
Indifi only receives revenue from processing and service fees on loans. In FY23, this revenue increased by 102% to Rs 198 crore. During the previous fiscal year, the company also earned other (non-operating) income totaling Rs 15 crore, primarily from interest on deposits and other sporadic activities.
Since the company facilitates loans, interest fees and borrowing costs accounted for a sizable portion (32.5%) of total expenses. In FY23, this expense increased 83.3% to Rs 66 crore.
The cost of employee benefits increased by 27.3% to Rs 56 crore in FY23, indicating that the company increased the number of team members it employed to match the line of scale. In the prior fiscal year, Indifi’s bad debts decreased by 36.4% to Rs 21 crore.
In order to increase its overall spending by 47.1% to Rs 203 crore in FY23, the company added another Rs 5 crore and Rs 2 crore for legal/professional fees and advertising, respectively.
The Gurugram-based company was able to turn a profit thanks to its doubled scale and carefully managed spending. Compared to a loss of Rs 32.8 crore in FY22, Indifi reported a PAT (profit after tax) of Rs 5.16 crore in FY23. With 1.92% and 5.74%, respectively, its ROCE and EBITDA margins became positive in FY23. A unit of operating revenue cost Indifi Rs. 1.03.
Axio (previously Capital Float), InCred, Aye Finance, and Lendingkart are competitors of Alok Mittal-led Indifi.
The number of businesses that assert to be able to secure credit for groups with ‘limited’ access to it from traditional financial institutions is astounding. However, the fact that the funds are ultimately obtained from the same companies that appear to be unavailable shows that the issue being addressed is more one of information access and navigating the loan application process. Given that access to credit information and records is constantly being improved, one has to question the long-term viability of such intermediaries.
Similar to how PB Fintech handles insurance policies, where the latter essentially handles most customer service and renewal processes for the partner institutions, Indifi has done well to reach scale in this business, placing it well to build a long-term case for entrenched relationships with institutions for loans.
