Pankaj Sharma, CEO, Religare Finvest Ltd.

Going forward customized credit will be the way forward as SME get into specific businesses in the post COVID era.

Oct 06, 2021 04:10 IST India Infoline News Service

In an interaction with Shweta Papriwal, Editor,, Pankaj Sharma, Chief Executive Officer said “RFL is committed to providing debt capital to power the growth of the small and medium enterprises (SMEs) which constitute as the backbone of India's economy.”

Can you share a brief overview of the group?

Religare Finvest Limited (RFL) is a subsidiary of Religare Enterprises Limited (REL), which is the listed holding company for Religare Group and Core Investment Company (CIC) registered with the Reserve Bank of India (RBI). REL has four key financial services businesses under its subsidiaries i.e. 

1. Care Health Insurance Limited (CHIL)-  Health Insurance
2. Religare Finvest Limiited (RFL)- SME Finance NBFC
3. Religare Housing Development Finance (RHDFCL)- Affordable Housing Finance
4. Religare Broking Limited (RBL)- Retail Broking

All these Religare Group (REL & subsidiaries) has access to a wide reach of customers – 1 million+ policy holders in insurance business, 1 million+ broking customers, more than 26k+ customer served through MSME finance & 10k+ customers contacts in affordable housing finance. As on March 31, 2021 Group has overall employee base of more 11,000 professionals servicing diversified set of customers and Group has reach to around 1,000+ locations around India.

RFL is a non-deposit taking systemically important Non-Banking Finance Company (NBFC). RFL is committed to providing debt capital to power the growth of the small and medium enterprises (SMEs) which constitute as the backbone of India's economy. RFL provides commercial finance services and offers working capital, secured business expansion, and short term trade finance loans to SMEs. It has a network of 19 branches across all major cities in the country. As on March 31, 2021, RFL had a total loan book size Rs 4,873 crore

The company focuses on financing, retail capital market financing and corporate loans for SMEs. RFL understands that each financial need is unique and offers customized ‘secured’ and 'unsecured 'loans’ to empower the customers. The company also runs a retail capital markets financing business which includes loan against marketable securities. The company’s lending solutions includes SME Mortgage Loans, SME Working Capital Loans, and Short Term Trade Finance.

The past few months have been very challenging for every sector. Has RFL also felt any impact?

Yes, RFL also faced headwinds during the past few months due to pandemic esp. in the contact sectors of hospitality, travel and tourism and some other services industries. However, there has been a faster recovery of these sectors who have started generating improved cash flows and are coming out of stress.

How flexible, collateral-free credit helps in scaling economic opportunities for SME’s and MSME’s

Unsecured collateral free business loans are a great funding option for SMEs and small businesses that don’t have assets to offer as collateral and are presently under-banked. These are also good for SMEs who are growing fast and need finance at short notice. These help SMEs in furthering their business plans and carrying out their business in a hassle free and speedy manner without going through the hassles of collaterals, its valuations, legal documentation, etc. It also helps SME companies maintain a healthy cash-flow balance and liquidity for business growth. These loans have become especially important after the COVID-19 outbreak when SMEs have found it difficult to raise working capital as these loans offer reasonable interest rates and flexible repayment options.

How customized financing solutions is the way for small businesses

Customized credit is most suitable for SMEs as the credit needs of each SME is unique to their business and need tailor made financing for their specific needs. For instance, small businesses generating regular cash from their customers would prefer to repay their liabilities matching their inflows. Such flexibility will help them reduce their interest liability and also improve their credit scores. Today we are offering fully customized financing options for SME to meet their specific needs. Going forward customized credit will be the way forward as SME get into specific businesses in the post COVID era.

Have Indian MSMEs shown more resilience during COVID-19

SMEs were one of the worst affected sectors during the COVID-19 pandemic. According to rough estimates, the pandemic impacted MSME earnings by 30-50 per cent. While the main problem faced by MSMEs in India was a severe liquidity crunch, the sector faced challenges in debt repayments, payment of wages and in statutory dues. The impact of the pandemic on MSMEs was also on employment, sales revenue, and cash flow. Other problems being faced by the MSMEs during these times are a decrease in demand as they could not reach customers, supply chain disruptions, cancelation of export orders, raw material shortage, and transportation disruptions.

A large part of the SMEs however found a way to buck the trend and went in for digitization to overcome these problems and challenges. While digitisation was adopted more out of compulsion than choice, it has not only helped them in saving costs but also increase business. Digitization has proven to be beneficial as it helped increase their value and productivity and has now become the way of business for SMEs. This has further lead to formalization of the economy and would help set in a virtuous cycle of business and economic growth.

What are the challenges and opportunities for MSME sector in FY22

Lack of adequate capital continues to be and will be the most important challenge for the MSME sector going forward. EVEN though the government has more than doubled the budget allocation for MSMEs for FY 22 to Rs. 15,700 crore as against Rs. 7,572 crore in FY 21, the problem is still a significant one for the sector. More innovative and customized financial solutions are required for this sector if it wants to stay successful and productive. FY 22 also provides a lot of opportunities for MSMEs given the fact that the government wants to double the Indian economy to $ five trillion in five years. As MSMEs constitute the backbone of the Indian economy and industry and contributes approximately 30 per cent towards India’s GDP, there is plenty that this sector can do and achieve provided their capital needs are met with in a timely manner and they adapt to various technological innovations on their way. NBFCs focused on MSMEs will help with the former while the digitization of payments is the way forward for latter.

Future outlook for MSME sector

India’s roughly 6.3crore MSMEs have a bright future considering that the post COVID-19 era has thrown open many opportunities that were not there before. While the industry itself is rebuilding, the government has also extended a helping hand to help this sector. With e-commerce and online activity more than doubling in the post pandemic period, many new opportunities have emerged for this sector to reach their customers and grow their business. MSMEs are rapidly adopting digital payments over cash, with 72 per cent payments done through the digital mode. Rise in digital adoption presents prospects for further growth in the sector. Initiatives like TReDS hold a lot of promise though their current adoption rate is below par.

MSMEs are being encouraged to market their products on the e-commerce site, especially through Government e-Marketplace (GeM), owned and run by the government, wherefrom Ministries and PSUs (public sector undertakings) source their procurement. As of July 20, 2021, the Government e-Marketplace (GeM) portal served 7 million orders worth Rs.122, 405 crore (US$ 16.39 billion) from 2.2 million registered sellers and service providers for 53,193 government buyers.

Share your views on the co-lending model and inclusion of NBFCs under on Tap TLTRO scheme

Co-lending model introduced by regulator to leverage on high liquidity available with one partner and distribution & flexibility with the other partner can be a game changer in future. Such partnerships hold lot of promise provided such partnerships are well thought out keeping in mind the mutual benefits that each partner can derive. The partners need to complement each other and avoid overlaps and competition to the extent possible for the success of this model.

Inclusion of NBFCs under on tap TLTRO is welcome step but the proof of the pudding is in eating. How the banks will take it up to fund the NBFCs in need of liquidity remains to be seen and the extent of utilization under the same would be a proof of its success. NBFCs at their end are also being extremely cautious in growing their books in the current uncertain times and using the existing cash-flows from improving repayments for disbursements and maintaining their book.

Can you take us through what is your overall growth strategy over the next three to five years?

Post restart of business, RFL has plans to ramp up business significantly and focus on MSME finance for businesses with strong business models, strong entrepreneurial energy and good cashflow visibility. The company believes that India SME’s are making world class product and services and can compete in not only local but global markets. We would like to ramp up both physical presence and digital footprint. We expect strong credit offtake as the Covid -19 pandemic tapers and RFL partners with MSMEs in their growth journey.   

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