Bengaluru-based Kreditbee reported a 20% fall in net profit to Rs 20.7 crore for the quarter ended September 30 from Rs 25 crore a year back. Its operational revenue jumped 73% to Rs 518 crore, but its expenses shot up 84% as well, driven by increasing cost of borrowing and impairment on financial instruments.
Fintechs that typically cater to the riskiest segment of the country’s consumer base have seen their cost of borrowing go up. Industry insiders peg the increase to be anywhere between 125 basis points and 300 basis points, depending on the spectrum of operations.
“For base layer NBFCs, the increase of their cost of borrowing would have gone up by 200 basis points and above; for the middle layer, it will be around 50-80 basis points and for the largest players, it would be a maximum of 50 basis points,” said Santanu Agarwal, deputy managing director at Paisalo Digital, a New Delhi-registered NBFC.
Pune-based Fibe reported a net profit of Rs 12.4 crore, keeping it flat compared with a year earlier. While its operational revenue rose 56% to Rs 252 crore, expenses went up 63% to Rs 235 crore.
Consumer lending startups with exposure to the unsecured loan segment have been facing a tightening of money flow and some bit of stress in the ecosystem, said industry insiders. Banks and larger non-banking lenders are mostly staying away from lending to such platforms or asking for higher interest rates, they said.
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“For the last few months, particularly, fintechs providing unsecured consumer finance have experienced some changes especially due to nudges (from the regulator) related to duration and pricing of credit and customer grievance redressal, etc. As the sector is scaling up, probably this is the apt time to tighten up some loose ends for long-term sustainability,” said Jatinder Handoo, chief executive officer at the Digital Lenders’ Association of India.Sachin Bansal-backed Navi, reported Rs 70 crore in net profit in the September quarter, compared with Rs 10.8 crore a year back. The Bengaluru-based lender suffered an embargo on its business in October, which was finally lifted last week. The banking regulator asked it to maintain fairness in its loan pricing going forward.
Even lenders offering unsecured business loans are facing challenging times as there is an overall slowdown in the unsecured credit business. Ahmedabad-based Lendingkart posted a net loss of Rs 65.6 crore, after reporting a net profit of Rs 29 crore in the year-earlier quarter.
ET had written in October that Lendingkart was looking to take a valuation cut to around $100 million (effectively one third of its last private market valuation) as it is negotiating a fresh equity funding deal with Temasek subsidiary Fullerton Financial Holdings.
Kinara Capital, which focused on business loans, swung to a loss from being profitable a year back. In the first half of the current fiscal year, the Bengaluru-based lender reported a net loss of Rs 32 crore, compared with a profit of Rs 8 crore a year back.
Listed NBFCs with more stable operations and a better credit profile have also faced tightening in their business, albeit at a smaller intensity.
New Delhi-based Paisalo reported a net profit of Rs 49.5 crore in the second quarter, marginally up from Rs 47 crore a year back.
Ugro Capital, which acquired digital loan origination platform Shubh Loans in May, reported an increase of 21% in net profit to Rs 35 crore compared with Rs 28.8 crore in the same time period last year.
“Given we are already operating at scale, stable growth ensures repayment of our loans is good. We strictly follow RBI guidelines and given we are in the business of risk underwriting, our focus is on profitability and not on massive disbursement growth,” Agarwal of Paisalo said.
Industry insiders pointed out that as digital lending players slow down and mostly move away from catering to the highly risky category of borrowers, there is a chance that some of them might fall back to informal financing channels.
Handoo of the Digital Lenders’ Association said this will have an impact on the selection of quality of customers.
“A percentage of subprime and customers with little credit history may get filtered out which doesn’t necessarily mean absence of demand. It simply means relocation of source of credit from formal to informal sources, over which there is a negligible oversight and control,” he added.
