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Vaccine king Adar Poonawalla forays into tech-enabled lending


(This story originally appeared in on Aug 17, 2020)

Mumbai: Vaccine king Adar Poonawalla of Serum Institute has made a major play into technology-based lending even as many corporate houses are scaling down their non-banking finance operations. The $10-billion cash-rich group has invested Rs 850 crore in Poonawalla Finance and aims to adopt a low-leverage, low-cost delivery model to high-quality individual borrowers.

The one-year-old Poonawalla Finance has already disbursed Rs 1,500-crore personal loans in the range of Rs 2 lakh to Rs 30 lakh at rates that compete with banks — with no security, no guarantors and zero prepayment charges being its unique selling proposition. With targeted disbursements of over Rs 2,000 crore during the current fiscal, the non-banking finance company (NBFC) is the fastest growing personal loan provider during the pandemic.

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According to MD & CEO Abhay Bhutada, the company’s strategy is unique in many ways. While NBFCs typically go after customers who are usually higher risk than bank customers, Poonawalla is targeting high-quality bank customers offering 10-12% rates, which is extremely competitive in the unsecured segment.

“Ethics and values are core to the group — there are no hidden costs or prepayment charges,” said Bhutada. Also, unlike other finance companies that are facing a problem of short-term borrowings, Poonawalla Finance is using longer-term funds to provide short-term loans. “We have come into the market after DHFL and IL&FS and what is a weakness for other NBFCs is a strength for us. For instance, our average tenure of borrowing is five years, but the average tenure of our loan is only two years.”

Enabling scale during the lockdown is the appraisal process that is entirely automated with the underwriting software analysing the applicant’s bank statements, credit history, and GST data, wherever available. “This is the first time it is happening that a 30-lakh loan is being given in a 100% paperless and contactless manner. Even conservatively, we will grow 35% this fiscal,” said Bhutada.“For us, Covid lockdown is an opportunity similar to what demonetisation threw up for digital payment companies,” said Bhutada. Besides the strong parentage, the company is able to borrow funds at 7% because of its high capital adequacy ratio which, at 72%, is nearly five times the 15% statutory requirement.

One reason why the company can grow even as others are shrinking is its ability to expand market share by drawing customers who are seeking to refinance higher-cost loans. “We are the first NBFC to offer loans at a lower rate than private banks. In terms of customer category, we are targeting the bank customer,” said Bhutada.

The company has started out with unsecured business loans, personal loans for salaried individuals, and professional loans for doctors, chartered accountants, architects, and company secretaries. It now plans to source customers through co-lending, under which it will join hands with established NBFCs to lend and retain the majority of the loan. Very soon, it is planning to expand into new categories like co-branded credit cards and loans against property.


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