Navi Technologies Limited is a technology-driven financial products and services company in India focusing on the digitally connected young middle-class population of India. It is uniquely positioned in India as one of the leading end-to-end digital ecosystem players with complete control over all three non-payments financial service offerings – lending, insurance and asset management, according to the RedSeer Report. It has adopted a mobile-first approach, utilising its strong in-house technology and product expertise to build customer-centric products. Since the Company’s incorporation, it has expanded offerings under its “Navi” brand to include personal loans, home loans, general insurance and mutual funds. It also offers microfinance loans, through a wholly-owned Subsidiary, under the “Chaitanya” brand.
The Offer is Fresh Issue with aggregates up to ₹33,500 million. Out of the net proceeds from the fresh issue, Investment into its subsidiaries, NFPL and NGIL will amount to ₹25,200 million and the balance would be utilized for general corporate purposes.
The company’s revenue from operations has increased from ₹559.48 million in Fiscal 2020 to ₹1,366.63 million in Fiscal 2021. The company’s EBITDA increased from ₹477.32 million in Fiscal 2020 to ₹2,342.18 million in Fiscal 2021 while PAT increased from ₹(80.71) million in Fiscal 2020 to ₹711.88 million in Fiscal 2021.
|(`₹ in millions)||FY19||FY20||FY21|
|Revenue from Operations||559.48||1,366.63||965.75|
|EBITDA Margin (%)||80.71||711.88||2,064.27|
Navi Technologies is a fintech startup founded by the ex-founder of Flipkart, Sachin Bansal. There are many listed companies that already work in the fintech space. Let’s take a look at how they are positioned in the stock markets.
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Navi Technologies Limited model enables it to (a) cater to digitally connected Indians, (b) avoid intermediation and reach customers directly in tier-1 cities and beyond, and (c) offer an unassisted buying journey with one of the lowest turnaround times amongst lenders in India, in the personal loans category, as per RedSeer Report. The company’s mobile first approach enables it to serve customers in a much quicker time frame. The TAT for its fastest disbursals of personal loans was less than 4.5 minutes, and the fastest TAT for the issuance of its retail health insurance policies was under 2.5 minutes. The company has designed the Navi App with the aim of making the customer journey seamless, with simple and easy-to- understand products. For its personal loans, the entire process from the loan application and disbursal to repayment is paperless and conducted digitally. For its health insurance products, the policy purchase process is designed to be digitally seamless, and 61.17% of all its health insurance policies issued since launch up to December 31, 2021 were issued without any human assistance.
Navi Technologies ability to develop simple and intuitive products from the ground up ensures end-to-end ownership of its products. It has a limited dependency on third parties as to its own the entire value chain right from in-house technology to product designing. The company’s end-to-end ownership allows it to innovate across its product designing process. This helps the company to regularly iterate and improve its product features and deploy them to the market quickly. According to the RedSeer Report, it has positioned as an end-to-end digital ecosystem player in India. Being an end-to-end digital ecosystem player, the company is a step ahead of “digital insurgents with third-party partners” because of its flexibility to offer new products and pivot into new services, rather than being dependent on financial services partners.
Navi Technologies Limited’s business is technology-driven and underpinned by its in-house technology expertise, culture of application-led innovation, data analytics capabilities and its integrated, scalable and sophisticated technology platform that is capable of delivering and managing its range of products. Since its inception, the company has made significant investments in its technology infrastructure leading to a full-stack approach. The company’s in-house technology development comprises customer facing portals, loan management and accounting capabilities that enable high transaction volumes, in-house underwriting engines running on artificial intelligence and machine learning models, a self-developed policy engine that fuels its insurance products, fraud risk management capabilities for fraud prevention and detection, and multiple process automation workflows to enable efficient back-end operations. All these technology platforms and capabilities are deployed on a robust and resilient cloud infrastructure which is secure and scalable. The company leverages its technology initiatives for frequent periodic updates of the Navi App to ensure high uptime.
Navi Technologies Limited’s underwriting, pricing, risk management and collections are driven by proprietary data science and machine learning capabilities. This provides with a significant advantage over traditional lenders who, according to the RedSeer Report, are largely dependent on excessive paperwork and manual evaluation which can be tedious and time-consuming. The company utilises artificial intelligence and machine learning to go beyond using only credit scores as a method of underwriting. Its models incorporate more than 400 variables and learn from a rapidly growing training dataset comprising 2.64 million repayment events as of December 2021. To proactively address fraud detection, the company does continuous sampling and analysis of its loan portfolio to identify emerging patterns and modus operandi. Its models are also able to leverage data to enhance its ability to prevent fraud by identifying outlier signals in data and behaviors as triggers. The company has developed a robust cohort-based collections model to efficiently follow up and recover dues that are outstanding. Its collections capability comprises digital reminders and follow-ups for payments, tele-calling and on-ground collection management.
The Navi App is a one-stop-shop for its personal loan, home loan, and health insurance products. Further, mutual fund customers are also able to track their portfolios on the Navi App. It combines its one-stop-shop approach with sophisticated data analytics capabilities to anticipate customer behavior and profiles to generate insights for cross-selling and up-selling these products within its network. The company also witnessed significant cross-sell traction on the Navi App from customers visiting the Navi App for buying other products. For example, during the nine-month ended December 31, 2021, 71.69% of all home loans customers and 52.67% of all retail health insurance customers, were from its Personal Loan Interested User Base.
The lending and microfinance business operations rely intensively on substantial capital and any disruption in its sources of capital could adversely affect its liquidity and financial condition.
The financial performance of the company is uneven as it has made a loss of ₹2,064.27 as of 9 months ending December 2021, after making a profit of ₹711.88 million in FY21
The financial services space in India is highly underpenetrated (across segments including lending, insurance, and mutual funds), which presents a big opportunity for a technology first company to capture a large market share
Target market segments in India present significant growth potential as reflected in the projected growth of such industries over the next five years, retail loan AUM is expected to grow at a CAGR of approximately 18-20% to reach US$1.15-1.25 trillion, health insurance GWP is expected to grow at a CAGR of approximately 16% to reach US$17.6 billion; and mutual fund AUM is expected to grow at a CAGR of approximately 17% to reach US$1.0 trillion.
The company’s in-depth market and customer research indicate that customers across segments experience multiple pain-points when availing of financial services. It can use this data to target product opportunities that provide access to large unaddressed markets
The company is dependent on its R&D activities for its future success.
Exchange rate fluctuations may adversely affect its results of operations as its sales from exports and a portion of its expenditures are denominated in foreign currencies.
The company requires various licenses and approvals for undertaking its businesses and the failure to obtain or retain such licenses or approvals in a timely manner, or at all, may adversely affect its operations
Navi Technologies Limited is committed to growing its existing product lines by attracting new users and driving engagement from existing customers through a continuously improving user experience on the Navi App and by providing tailored services that integrate with its existing offerings. The company plans to do this through the following initiatives-Further enhance its product proposition: The company will continue to monitor customer sentiment, usage behavior and customer actions to further enhance its view on customer needs and pain-points.
Making customer journeys more sea less/straight through: It will focus on reducing TAT and making the process more streamlined by improving its operating model.
Eliminating external operational dependencies: The company has identified external customer experience-related dependencies and it is building capabilities to eliminate such dependencies.
Navi Technologies Limited has made significant investments in its technology infrastructure, machine learning models and data analytics capabilities to strengthen its offerings and customer experience. Going forward, the company plans to continue to develop and invest in sophisticated technology to further strengthen its technology infrastructure. Further, the company will continue to focus on hiring and retaining strong technology talent. It will continue to strengthen its micro-services technology architecture, an organizational software development approach that utilizes a collection of small autonomous services, to make the Navi App more agile and scalable.
The company expects the accuracy of its machine learning models to improve as it scales-up and capture more customer data. This will enable the company to improve its understanding of customers and maintain asset quality by accurately identifying credit-worthy customers.
Navi Technologies Limited will continue to utilize its in-house research capabilities to identify large market opportunities. The company will leverage and replicate its learnings from existing businesses and customers’ needs while launching new product offerings. Further, the company will continue to leverage customer insights to identify and anticipate their needs and deliver differentiated products and services. It will also explore strategic acquisition opportunities from time to time to strengthen the value proposition of the current portfolio and launch new offerings. In the long run its aim is to expand its product portfolio by launching adjacent lending and insurance products to capture a larger portion of the wallet share of its customers.
The Navi App offers an integrated ecosystem of financial services products where once customers enter its ecosystem through acquisition of any of its products, they can access its full range of adjacent product and service offerings. As the company acquires more customers on the Navi App, and as more customers purchase more products, its analytics systems will be able to capture and analyse an increasing amount of customer data. This integrated ecosystem approach has enabled, and will continue to enable the company, to capitalize on significant cross-sell and up-sell opportunities.
Since its launch, Navi Technologies Limited has developed a well-diversified funding profile by expanding its funding sources and lender base. As the company continues to grow the scale of its operations, the company would continue to diversify its lending profile and continue to improve its credit ratings to reduce its cost of funds. A lower cost of borrowings will help the company to improve its net interest margins, competitively price its loans and other products, and deliver better return ratios.
The content on this page is made available on the basis of the DRHP (draft red herring prospectus ) filed by Navi Limited. The final content could change based on the Red Herring Prospectus (RHP) filed