Inditrade embarks on loans to MSMEs with cash advances to traders
Inditrade Group, a leading agricultural financier, is entering the MSME lending industry after identifying “large unmet demand” from a segment it describes as one of the least banked.
“We start with Merchant Cash Advances (MCA) to merchants, restaurants, spas, saloons, grocery stores or kirana stores,” said Sudip Bandyopadhyay, president, Activity area.
“This would be our most recent offering beyond the financing of agricultural commodities and microfinance. We target segments of the business or groups of people who do not have a bank line, bank limits or whose banks refuse to lend.
Inditrade will initially focus on predominantly urban merchants and outlets and will collect collections from their collections – daily, weekly or monthly – depending on the structure of the loan. “We have the team, the systems and the procedures in place. We start in Mumbai. We then went to Pune, Hyderabad and Chennai. Kerala would be the next stop, with a focus on Kochi, Thiruvananthapuram, Kannur and Kozhikode.
Hyderabad, Pune and Mumbai would be covered during this very quarter. Coimbatore is the other city in Tamil Nadu where Inditrade plans to launch operations by the end of this quarter or early next.
Only a few players
“The need is huge, and we’ve done our analysis,” Bandyopadhyay said. “There are only a few players that serve this segment. But, overall, no more than 10 to 15% of the demand is satisfied. “
Asked about the size of the market, he said retail is a huge opportunity in India and it will get even bigger in the future. The trend of tiered consumption has essentially been maintained.
“If you exclude organized retail – Shoppers Stops, Lifestyles and Grand Bazaars – I would say 80% of the market is unorganized. The demand is high.
There are several estimates at different levels of market size at different levels. It is very difficult to quantify the exact figure since the segment is mainly served by pawn shops, own resources, friends and family members.
The size of the loan note with a term of one year can vary between 3 and 25 lakh, Bandyopadhyay said. “We have created three buckets of ₹ 3-10 lakh; ₹ 10-15 lakh; and ₹ 15-25 lakh.
Loan Book Size
Inditrade has set a loan portfolio size target of 100 crore for this fiscal year itself. The interest rate will depend on the credit risk it assumes for a borrower. Normally it would be 1.5%. 100 per year. This can go up to 2 percent in individual cases.
But it can also fall in deserving cases. Explaining the standard payback system, Bandyopadhyay said the case of a borrower with a PoS machine at their point of sale is instructive.
“We have a working agreement with the point of sale suppliers. Let’s say you are a kirana store with a PoS machine and you swipe for 5,000 a day. The PoS provider can collect 500 and give you 4,500. “
This is agreed in advance with the borrower. Repayment schedules are customized in most cases, depending on the business cycle. Inditrade has obtained all approvals from the RBI to enter the business, Bandyopadhyay added.