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Building The SME Credit Platform For Bharat | Manish Kumar @ KredX
467 Plays2 years ago
Cashflow is the lifeblood of business. Lack of it means one has to choose between paying salaries, stocking up on raw materials, and meeting customers' demands. KredX helps businesses get paid on their invoices within a few days instead of months. This practice is called invoice discounting, and KredX has made the procedure frictionless with the help of technology. From working in HSBC and Capital One to building KredX, Manish speaks about his journey with Akshay Datt.
Know about:-
- Stint at HSBC
- KredX score
- Fundraising Journey
- Becoming an operating system for supply chain finance
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Transcript
Introduction to the Founder Thesis Podcast
00:00:00
Speaker
Hi everybody, my name is Manish and I am a founder and CEO of critics. Hi, I am Akshay. Hi, this is Aurob and you are listening to the Founder Thesis Podcast. We meet some of the most celebrated set of founders in the country. And we want
Importance of Cash Flow for SMEs
00:00:25
Speaker
to learn how to build a unicorn.
00:00:32
Speaker
I'm sure you've heard of the saying cash is king. And that's because cash is the lifeblood of any business. No matter how profitable a business is, it will not succeed without a healthy cash flow. In India, cash flows for small and medium enterprises have always been a challenge. Businesses get paid a few months after they deliver their products and this causes stress on their cash flows. And
Credex: Revolutionizing Invoice Payments
00:00:55
Speaker
this is where a company like Credex comes in.
00:00:58
Speaker
Credex helps businesses to get paid on their invoices within a few days instead of months. This practice is called Invoiced Discounting and Credex has made this whole process frictionless with the help of technology. Credex has onboarded lenders on the one side who are looking for short-term investments with good returns and they have onboarded SMEs on the other side who are looking to get paid instantly on their outstanding invoices, thereby creating a win-win proposition for role stakeholders.
Manish's Journey to Founding Credex
00:01:27
Speaker
In this episode of the founder thesis podcast, Akshay Dutt talks to Manish Singh, the founder of Credex about his journey from working in financial institutions like HSBC and Capital One to starting Credex to solve the problem of access to credit.
00:01:42
Speaker
So I joined Citi as a product manager, and then it was a good growth that was happening, both for the company and for me. Company has gone, Citi Financial has gone from 50 branches to 356 branches in two years, became the best known NVFC in the country, as in all bajaj and service, fundamentally copied that model which Citi has championed at that time. We has the best system on the whole check-print, everything online. So all those things which is unheard of even today was happening in 2003.
00:02:11
Speaker
And with that, I started getting team to manage. And then I started thinking, I have just 2 years in the corporate world and I have to teach other people when I have so much more to get to learn on my own. And that is the time I said, I have to move out of the city. So I joined HSBC and HSBC joined this side.
00:02:41
Speaker
And then again, 7-8 years in risk, different products, different verticals. So HSBC, I was part of the US business of HSBC. So in 2007-08 crisis, I thought I was in the middle of the storm. So I literally, like when I'm saying middle of the storm, actually middle of the storm. I remember in 2006, I flagged off one strategy which eventually survived.
00:03:02
Speaker
I just received closer to $1.3 billion. And this is an effect. 2007 crisis, I haven't done full daylight on papers. And I said, something is going screwed up. And we have to close this thing. And my sales head has said,
00:03:22
Speaker
HSBC was doing Subprime Lending, right? HSBC was doing Subprime Lending, Subprime Lending was one of the topmost in the US, household finance and HSBC was basically household finance. So they had a very high exposure. Very high exposure and they are doing it. So the strategy which I asked them to close is going to impact per sales by 4 billion dollars but basically it was by a charge of 1.3 billion dollars impact per hour.
00:03:46
Speaker
So, saves of $4 billion, what HSBC might make, maybe a few hundred million dollars out of it, but losing $1.3 billion doesn't make sense. So, they are like a pavilogia, child billion, portfolio closed, and they give us the rent. Well, basically, you ask them to stop giving a certain type of loan. Yeah, stop lending to a certain audience.
00:04:07
Speaker
I just said, close girl, though. Then I pleasantly gave it to my chief risk officer. And he said, he had problems, but they're going to make your business start together. But I think it was all good. Then back in 2012, HSBC wanted to sell their portfolio. Not because it was making loss, but because of the only portfolio in the US, it was a big sector. That was not making too much money. And they were a shareholder in the US business go high, of course.
00:04:34
Speaker
So they sold it to CAPFON as a part of the movement. I moved to their CAPFON work there for two years. And that is the time when I decided to... This is again, you were sitting in India and managing. Correct, correct, correct. So then that is the time when I decided to take care of the bank.
00:04:52
Speaker
Because by that time, I was part of closer to 5 M&A within banks, where either I was part of the buying side or selling side. And each side has their own pros and cons in terms of it. And I pretty much realized, here in the bank, there is a bank that has a top 9 to grow and bottom 9 to sell. So that's the time I said, let's do something of my own. And that's where my entrepreneur journey started.
00:05:19
Speaker
So, how did you finalize what you want to do? Like you decided, let's do something and then, you know, how did you finalize it? Yes. So,
Challenges in Construction and Cash Flow Solutions
00:05:29
Speaker
a little bit of detour that I have taken in between is I have started our construction business in between.
00:05:36
Speaker
which was when I was doing some kind of, you know, government works, like government contract I was taking in, but I'm building some bridges, some roads, etc. In Patna, in Bihar. In Bangalore, in Karnataka. My graduation was in civil engineering, right? So, for about each part, I thought, shall I start? That is the easiest one.
00:05:53
Speaker
And then on papers, I was profitable, but cashflow was the problem. Because, you know, I was doing everything at a margin of 20-25%. But the problem was that I was not getting cashflow from the government. So if I'm raising an invoice, I didn't get paid for a year or two years kind of thing.
00:06:09
Speaker
So eventually I had to shut down because there is no cash flow. There's no money to do next, right? It's all on papers, keep on papers and profit table and making money, but there's no money. So after CAPFON, I decided that I had to start. I thought that this is the one thing which we need to solve. And at that time also what happened is no banks was ready to get me going because they want collateral and I was not having collateral. I just move off our cash flow movement that I was trying to do. I put my own money. For your construction business, you were trying for a loan.
00:06:37
Speaker
for my construction business. Yes, yes. So I know that there was
Understanding Invoiced Discounting
00:06:41
Speaker
this problem statement, which is there, which is, and the money is making me stop for ages with other governments or companies. So that's what sort of reminds of foundation of what I wanted to do. Then I started researching and I realized there is a concept called Hyundai. I must have heard Hyundai, Hyundai, right? So Hyundai is nothing but sort of, you can say,
00:07:06
Speaker
invoices is an approving this invoice and I will pay it to you in 90 days. And then people used to go and send this invoice to somebody else, right? So India may send the community a grant fee, right? So some things are amazing in this finance and some things don't get paid. So there was a large number of people who are just doing this and there are tens of thousands of crores has been put by individual investors into this kind of thing.
00:07:35
Speaker
But it's totally unorganized. It was like, yeah, I know you, you know, somebody else. I already said, here, these are me. And it's typically like a 90, 95% cash for the invoice link. Correct, correct, correct. Exactly, exactly. So build on these two premises. I said, why can't we use, you know, structure this entire thing and make it network neutral and make it more data and platform dependent rather than having mediator in each, uh, in the notation. So.
00:08:00
Speaker
On this concept, we started this entire story. And then everything started adding up. So when we say that, OK, how to mitigate the risk? So we said that Kijo Yampe, buyer, that needs to be a known party. If you are removing the mediator from between, the buyer needs to be a known party. So we said that the buyers has to be a large company. So let's say, now, let's say I'm a person, and I'm a company. I'm raising an invoice to Tata Group. Tata Group has said, Kia, mine today's my payment current.
00:08:28
Speaker
Right? Now, I have a choice to either wait for 90 days or I will send this invoice to somebody else. Right? Now, that somebody else who's buying what he's buying, though he's buying an invoice from me, he's actually buying a liability of Tata Group. It's put as a liability. Now, Tata Group is going to have a normal paper marketing buy for me. So, it might be available at X as a cost of fund. What do you mean Tata Group papers? What is that?
00:08:52
Speaker
People's means let's say bond bonds or corporate papers or c-e-n-c-d with which companies raise to basically tatamov or tatagup is trying to raise money on its own, right? So it's the cost of index over but you have a tatagup by vendor edge or tatagup key library page here but he's selling it x plus y.
00:09:09
Speaker
So it's fundamentally arbitrage gain. It's become a arbitrage gain, which is fundamentally that when I'm buying from a vendor of Tata Group and invoice, though I'm buying it from that vendor at X plus Y plus, I'm actually buying a liability of Tata Group at which maybe I will give you a tax cost. So Y come here plus net net $5 after.
00:09:26
Speaker
So it becomes a very interesting asset class in that time where people can invest in a very high quality papers at a higher kind of a field and that too for a very small period.
00:09:43
Speaker
So the question remains is what if Tata group defaults? So the answer to this Tata group is not going to default in 90 days because the period is very small. When we
00:09:59
Speaker
It started putting up all the pieces of the puzzle together. We realised, yes, this is our new asset class. Though initially we thought it's going, it is becoming too good to be true. Because you are saying high, you are saying low risk, you are saying less maturity, right? So, in a way you are saying, return below low risk, less maturity, you are saying lower risk. But what is the risk? Again, when does the quality defect matter?
00:10:28
Speaker
Correct. So what we do is we have no accepted invoices. So what we do is, we ask the permission from Tata, this is an accepted invoice, right? So that is one thing. So nobody can give us a fraud invoice. The second query that we also put up is, we don't find 100% of them. So what we're looking into on previous reports, we find it out. So let's say, our quality consent puts we know that.
00:10:57
Speaker
Then also we take 20% margin. So instead of 100 rupees, I will give you 80 rupees.
Credex's Secure Transaction System
00:11:02
Speaker
And when the 100 rupees will come to me, then I will release back that 20 rupees back to you. But let's say I have a quality concern 5 rupees. So now 95 will become my new 100 and I will still take 20% margin on 95 rupees.
00:11:14
Speaker
So, 20% of the time, we have 20% of the time for any kind of unseen scenarios that will come up. So, basically, the vendor still has skin in the game. The vendor is a skin in the game and they want to have a skin in the game, right? Because, let's say, if I will tell you that he has 100, he has 100, and what will happen if tomorrow's payment will not come? I will go to Tata Group and other buyers and I will pass it over to them and we will have a relationship with them, right?
00:11:41
Speaker
So that's why they say, I want to do the management, the collection management. So most of the vendor is like writing to the buyers on themselves, saying that what is the default? So all those things will always come to you. So from that perspective, they want to manage the relationship. That is good for us because they know the buyers and the relationship much better than us. And then we have this and there's also the risk in the K and Q of each person.
00:12:12
Speaker
So what we have done is we have done an escrow arrangement. So we created an escrow account for them and all the payments were routed to us. So the payment comes to us and from there we routed to the vendor route. In this case, if investors have invested, when investors have invested, 20% of them have been routed. Got it. And did you see this as like a peer-to-peer thing? Not exactly. So this is not fundamentally. H&Is can come in then.
00:12:37
Speaker
Yeah, but this is not a peer-to-peer lending perspective, though it's still peer-to-peer, but it's not a lending because a discounting is not a lending, right? So when I raise an invoice, what I do is in my balance sheet, I put an entry as account receivables, which sits on my asset side, right? It's similar to putting up a chair or a laptop on the asset side, right? So you are selling that asset.
00:13:04
Speaker
And the guy who's purchasing, he's saying he's 95 rupees per car, 90 days per car. He's buying it. So, he's buying it. So, he's buying it. So, he's buying it. So, he's buying it. So, he's buying it. So, he's buying it. So, he's buying it. So, he's buying it. So, he's buying it. So, he's buying it. So, he's buying it. So, he's buying it. So, he's buying it. So, he's buying it. So, he's buying it. So, he's buying it. So, he's buying it. So, he's buying it. So, he's buying it. So, he's buying it. So, he's buying it. So, he's buying it. So, he's buying it. So, he's buying it. So, he's buying it. So, he's buying it. So, he's buying it. So, he's buying it.
00:13:33
Speaker
So, it's not a lending because it moves from a balance sheet to a P&L.
00:13:37
Speaker
Right. Okay. Okay. And the party which is buying it, these are what? Are these NDFCs to do it or these are just like any kind of? This could be anybody. Now, once you put this as an equation, right, that anybody can be a partner. It is more like an exchange, right? So you can have H&I buying it, you have a family office buying it, you have a corporate treasury buying it, you have an NDFC buying it, you have a bank treasury buying it. So anybody can buy it with those now fundamental, it's a paper that you're buying. So
00:14:05
Speaker
In the end of the day, we will write one of the bank's treasury or FFC treasury or corporate treasury or H&I's. They are buying an invoice which is a liability on a large rated company's books and you're keeping it in your books. So it's more like a bond or corporate papers that you are buying. It's just that it's very liquid because 30-90 days have passed in India.
00:14:26
Speaker
And the yield is higher than buying bonds. Yield is much higher than buying a bond or a paper. Correct. So essentially this then becomes a marketplace for as an alternate marketplace to a debt market. Correct. So it's more like an exchange.
00:14:41
Speaker
Well, you know, anybody wants to sell their, these kind of account receivables or other things, they can sell it and anybody can come and buy it. And let's say we also created a secondary sell for that. So if let's say I am holding a 90 days paper and somebody wants to sell it within 30 days because for passage away there, so he can come and further sell it to some other investors also. Right. So all these options, so it's fundamentally because more like an exchange layer.
00:15:12
Speaker
And which is why you probably named it credits, it's like a credit exchange.
00:15:16
Speaker
Yeah, actually, it's a very interesting name or renaming that has a friend in credit. So initially, when we started, the company name was Mandi. So people was totally divided on Mandi as a name, right? There are people who are saying that he had judged to my Mandi, this is fake. That even so catchy. And there are people who are saying here. So is it more riskier here?
00:15:39
Speaker
So then we started thinking here, if we have a global ambition, then we have to rename it to something which is neutral. So we started looking out the evening that all of us were brainstorming. So we started doing, after five hours of brainstorming, we come to a name called Gradleastake. So Gradleastake, Gradleastake, I am. And just to be sounds cooler, we name it instead of C, we'll have a K.
00:16:04
Speaker
So, we put it right. So, credit, one of the guys says, credits. Let's put X. And everybody said, let's do a dipstick.
00:16:15
Speaker
So tell me about your like, you know, go to market, your launch, your zero to one. So 2014, you quit your job. You obviously had no prior experience of starting a business. Initially, you would probably need to also have like, say a Tata, you know, these kind of corporates, you would need to have some sort of a partnership with them also.
00:16:39
Speaker
Sure. So I think Bellamy started together. So we started it in 2013, September. And in the first leg was seeing FinTech and financing. First leg was always regulatory. So we went into regulatory. And almost, I think, 99% of the lawyers said, the first thing you discussed like in half an hour, what are you saying is it cannot happen.
00:17:04
Speaker
And for a few months, we were like, here, shiving or something, right? But at the same time, we were like, what is wrong in that? So I actually started reading legal books on my own. So I have, I purchased like, you know, 20, 30 different legal books for Google.
00:17:22
Speaker
And then we started going to the lawyers and with the lawyers, we started asking, which law? Tell me the law. As per contract law, this happens. As per this law, this happens. As for marketing and financial services act, this happens. Then the lawyers started taking it seriously that we can't just say, we have to tell it that why it cannot happen.
00:17:45
Speaker
So then they started going deeper into it. Okay, what do you mean by this? What exactly is what's how the accounting will happen? So then we started telling all those things.
Navigating Legal Challenges with RBI
00:17:54
Speaker
Finally, what we also did is we started getting in contact with RBI. So we, there was a professor at that time in, I'm Bangalore. I reached out to him and I asked him for guidance and mentor. He was also a directorate in RBI.
00:18:07
Speaker
So I asked him that if he can reach out to folks in RBI and maybe get some initial buying. So he said RBI as a regulator cannot give you anything officially, but I can get something like, you know, just pass it through people to get the initial feedback. So he helped us a lot in terms of, you know, finding the entire piece of the puzzle. We even went to RBIs on a campus once to present it to a larger audience in RBI and other things. Overall, we realized that it's
00:18:33
Speaker
possibly not something which we are doing immediately. It's something maybe it's in a gray zone which never has been looked by the regulators, possibly is ahead of time in terms of that. So that gives us a lot of confidence to move ahead. We started working on it.
00:18:48
Speaker
You were alone so far, or did you have a co-founder? So first initial, I think eight months I was doing this on my own. And then after that I reached out to a few friends here in South fingers. And then Andralg was my batchmate from my IT days in May, so I spoke to Al.
00:19:09
Speaker
So that's where Anwar also came. So this was, I think, before we start working on MVP, but most of the vegan-related CJK, I was pretty sure it was up there. And then we started working on MVP. So MVP may be mostly outsourced upon a biotech part of it, and one of us was techies, which they picked up product for the technology.
00:19:28
Speaker
You did something where people can upload an invoice and the investors can pick an invoice. At the 10th initial, the product was more on bid and option model. So, you know, you will bid for AT&T invoices and the investors will be bidding, saying that how many people will accept it.
00:19:50
Speaker
So initial product was an entire big auction model, both of them use a little bit of my product knowledge from my city days before our financial product Kakegush Pushmanalia. And then we did a lot of sort of growth hacks in terms of, you know, for a PRI there was a year after some numbers here and there called Kakeg. And then apparently we started fundraising process also, so we spoke to few.
00:20:10
Speaker
You needed a corporate tie-up, right? Did you need that or that was not needed? Not necessarily, not a corporate tie-up, but fundamentally, we have a processing place where we say, here the corporate undertaking, what we call internally, is that we will always pay the money into account and we will never change the account without NOC of credits. This will work with us, so we don't need that.
00:20:44
Speaker
Yes, and we had to wait small at that time to go to corporate and say, yes, we had to wait small at that time to go to corporate and say, yes, we had to wait small at that time to go to corporate and say, yes, we had to wait small at that time to go to corporate and say, yes, we had to wait small at that time to go to corporate and say, yes, we had to wait small at that time to go to corporate and say, yes, we had to wait small at that time to go to corporate and say, yes, we had to wait small at that time to go to corporate and say, yes, we had to wait small at that time to go to corporate and say, yes, we had to wait small at that time to go to corporate and say, yes, we had to wait small at that time to go to corporate and say, yes, we had to wait small at that time to go to corporate and say, yes, we had to wait small at that time to go to corporate and say, yes,
00:21:00
Speaker
So that's the reason why we said we have to build it up, right? So all the windows, all the everybody needs. So we were sure about the windows side, let's try to solve on the western side of it. So we built the MVP, we have started. There are few early adopters who was completely unknown to us.
00:21:20
Speaker
These are like vendors, but you would first need vendors, no? So we went to Flipkart, we talked to Flipkart, Flipkart made a video about how to use our ID contacts, our previous experiences and all. And we said we had to upload Flipkart vendors. So I remember my first vendor was a Flipkart vendor basically. So we got the Flipkart to say that
00:21:44
Speaker
And this would be a marketplace seller or like a vendor. These are vendors who are selling to entity like WS retail and who are fundamentally part entity only. Okay, okay, okay. Like logistics partners. Logistics partners. Not only human resource, but they are selling to WS retail. So they're part of the bigger like Aka Cloud, telco seller, Amazon. So it's a fundamentally Amazon.
00:22:11
Speaker
These are print suppliers and vendors to these Flipkart entities. We are so excited that we will get a few vendors to come on board and we will start the Flipkart.
Early Success with Flipkart Vendors
00:22:26
Speaker
Back then, we also went to the other vendors. I went to the founders and get some other vendors. We also used some of our contacts to get some of the other vendors also. We got 5-10 vendors and they are ready to pass it.
00:22:41
Speaker
Yeah, e-commerce companies pay a long payment period, right? What's the vote? They pay...
00:22:59
Speaker
He's also getting a working capital faster in that time. Those guys working capital problem solving that. So that's, we were doing it. So Flipkart, some of the e-commerce companies and e-commerce companies. So in certain cases, they do build in 30 days, in certain cases they do build in 90 days also.
00:23:17
Speaker
But we get like good business vendors, we can start doing all those. And apparently we started working on investor side which was like enough not to crack. So initially there were some early adopters who were completely unknown. And then after reading our story. So basically, I think we got our story published in your stories and some of the other media thing.
00:23:40
Speaker
They read and they said, this is a concept that we have. There are a few things in these pallets that we have. If I can work with you, then I can scale up much faster. So, some people that joined there, some of our... One question. In West, in West Korea, there is a payment gateway that they have to pay for them to buy that.
00:24:05
Speaker
So they will do an f.rtgs transfer to the SQL account and then from SQL account it further deploy to the vendor. Yeah, SQL account, how is it different from a null account?
00:24:17
Speaker
So escrow account is fundamentally sort of, I think it's a trustee account. So bank is a trustee for that. It's a escrow agent. So you put the money into the bank and bank has become a custodian who says the fund can only be utilized for these purposes.
00:24:32
Speaker
Right? So you cannot take the money. So it's like this. So it's, it's users, let's say, right. And if these conditions are not met, then you need some money.
00:24:53
Speaker
So when this, the world will happen, but it's done, then the bank will take a charge and say, can you take a charge based on that? So consider escrow is more like a bank account. It's also considered as a bank account. So it's not like, so it's completely safe account from that perspective.
00:25:17
Speaker
Right. And for you also, it's less administrative overhead because that money, you don't have to make the entry for every transaction. You only have to make the entries for what is your share in this. Yeah, that's also true. But I think the bigger concern was more about the trust factor. So I'm a new entity, new startup. How can you make people trust you? So you bring somebody who
00:25:39
Speaker
home people trust which is a bank right nobody is better than a bank to trust and you assign the bank as a screw agent or a trustee and say now bank is taking care of the money bank will make sure that this money i'm not just you know using it for other or funding it to my account right so that's where the bank comes into our place so that's the reason why we have done it
00:26:00
Speaker
And yeah, like every time an invoice was discounted or an invoice was sold, then you would send the instructions to the bank like an agreement. Absolutely. Absolutely.
00:26:17
Speaker
But it's like a very manual process for the bank. Like they manually... It was initially a little bit of manual, then bank also evolved, we also evolved and we created a API in that. And bank was only to go like sample testing rather than each testing, right? So it's more like they do auditing terms also. In your SPRO, all the accounts are get audited by RBA also.
00:26:38
Speaker
So when marketplaces started becoming mainstream in India, RBI came up with new accounts called concept, which is the same that if you are buying something from a marketplace, that money does not belong to the marketplace. Money belongs to the seller, right? So who is a nodal account operator? Modal accounts say, and they have some guidelines in terms of the T plus three days came where we have to do the transaction and all those. So there are a lot of
00:27:02
Speaker
If send buts into Bell's nodal account and then also it gets audited on a quarterly basis. So there is a CA which gets appointed by the bank who audits that you have followed the rules or whatnot. So it is just a very evolved and more trustable instrument as compared to any normal.
00:27:18
Speaker
But I think with banks, we were able to get into it and we now have three banks who are partnering with ICICI, DBS and US Bank, where we have the Model S2 arrangement and they all work for this system. So up to a coffee common account, when we started it, it was an innovation sort of, because I remember when we spoke to the bank, banks said, this cannot be done.
00:27:38
Speaker
And we thought at that time that smaller banks will possibly win rewards. So we went to the smaller banks at that time and first at that time, let's put a yes bank in the same bank. But none of these banks were able to give us a back time. While we got a surprise when I say say bank will say that we can give it to you.
00:27:58
Speaker
And I remember I had a meeting at MG Road branch and I said, how soon? And they said, the big tech days. And I was like, sure. I was like, great. Let's do it. So yeah, but it was a great help from ICMCI at that time. And they able to pull it off and they able to deliver on this entire piece.
00:28:15
Speaker
Okay. Okay. So you, so let me recap how you put the pieces together. So you went to your network of folks in e-commerce companies like Flipkart, Urban Ladder. And you told those vendors, you can get instant cash up account. Then you created this escrow system so that the money transaction flows through that escrow. And then you
00:28:38
Speaker
when to find investors, some more H&I, some more family offices that you can get better return on your money. Like if you want to park money, instead of parking it in debt, why don't you use this? And I remember in, you know, escrow was actually the escrow setup took the longest time at least. And I remember when my team said, because you can't work without it.
00:29:27
Speaker
How are you earning in this? How are you earning in this? How are you earning in this?
00:29:31
Speaker
So, send it to an exchange, what we do is, take an AMOLED platform fee or, that is one, and then from the vendor, and from the guys who are selling, who is getting the money, basically, and then I take a transaction cost from both the side. So, I take from vendor also, for each invoice that gets sold, I take something from vendor also, I take something from investor also.
00:29:57
Speaker
How much is that? Yeah, it depends upon at what is the cost that they are sending. But typically, I can take roughly around 1% from both the site on an annualized basis, not on a per transition basis, but on an annualized basis, I take 1% from both the site.
00:30:16
Speaker
If you like to hear stories of founders, then we have tons of great stories from entrepreneurs who have built billion dollar businesses. Just search for the founder thesis podcast on any audio streaming app like Spotify, Ghana, Apple Podcasts and subscribe to the show.
00:30:39
Speaker
And so then, you know, what kind of traction did you see? When did your first transaction happen? When was the first invoice bought? So first transaction happened in July of 2015. That is the, I think, more of 27th or 28th of June, 2015. So that is the first transition that we have happened.
00:31:01
Speaker
I think we were doing more offline transition now than online. All those things were mostly happening at my time. So that was the initial instinct. Apparently, we were doing the
00:31:22
Speaker
Yeah, agreement sign, what is this agreement? The sale of invoice from one person to another person. So, invoice is, let's say, I'm a supplier to Philip card. I have raised an invoice to Flipkart, right? Now, as per Flipkart, they owe money to me. But now I'm selling this invoice. So, I have to have signed a contract saying that I'm selling my rights to receive the money on these invoices or to, let's say, Akshay. Right now, Akshay is going to get the money. So, that agreement needs to get signed within it.
00:31:50
Speaker
So it's a completely legally binding valid agreement of contracts at which sign. And once this signing happens, then the money gets transferred from investor or financials to the suppliers.
00:32:02
Speaker
Why is the seller of invoice signing the agreement with the buyer of invoice? They could both sign with you. So the seller could sign an agreement with you and the buyer could sign an agreement with you. And because when you escrow my account. Escrow is not my account. Escrow is an account of the investor itself, right? So the buyer is not transferring money to me. I am signing with so I have purchased from the seller.
00:32:29
Speaker
and then I'm selling it to the buyer. So the buyer has to basically transfer the money to me and then I need to transfer the money to that guy. So we are saying that in that case, there is a big leap of faith that buyer will be taken up because they're giving it to me. So what I do is I work like a two blue exchange. I say you do the right transfer to it, right? So just like the MSE, BSE are just facilitating the trade. They're not being part of it. They're just monitoring this entire thing.
00:32:55
Speaker
So we become the administrator. We are also a party into the argument. We also become third party saying that we are monitoring this entire, and there is a lot of fiduciary responsibility that comes to us also because the money will come into an aspect on time. We have to transfer and all those things. But what we do is we say that you do the direct conversion so that I remove me from the equation to say that you are directly taking care of this. Okay. Okay. And so like version one of product was where you were manually getting agreement signed.
00:33:23
Speaker
No, one of the products I said was a bid and auction platform that we did and also agreement to submit hiring but it was bid and auction and then we started realizing very soon it's sign consuming process and nobody's liking it because
00:33:50
Speaker
It was waiting a lot of time and fundamentally realized that this bid auction platform is not working.
00:33:58
Speaker
And then we moved to a buy now platform, which is we take a leaf out of eBay's book and he gave us a big auction. They moved to buy more mostly. We take a leaf out of eBay and we also become a buy now. So we said that, okay, as a seller of the invoice, you put what is the radio are comfortable selling. And if the financials is fine, they will do a fastest finger first and whoever comes in takes the invoices, he will get the invoice. So we went into that mode. So that was version two of the product. And we are still on that version two only till now.
00:34:28
Speaker
Okay. So you said if the financials are fine. Like you said that the seller can just upload the invoice, set his price and if the fund... Correct. So let's say, I'm a seller. I'm a seller. I said, I'm going to upload a flipcard. I said, I'm going to upload 30 days of payment.
00:34:49
Speaker
You give me, let's say, you know, some 49,50,000 and it's you, right? So, let's say, 9,8%. Now, there are a lot of investors on the platform.
00:35:22
Speaker
discovery, price discovery
00:35:25
Speaker
No, it's not the market price. Whatever is the market price, I'm buying it, right? So everybody's started buying at the market price. Then you will change the price to make it sell. Correct. Correct. Correct. So let's say somebody comes and a seller comes and say, you know, I'm an 8% native, I'm at 50 basis point zero.
00:35:48
Speaker
Right? And we said, if you want, you can still try. Right now, he put 15 mls point and nobody purchased it because it's just too low yield that investor is getting. And then the invoice will remain unsold. And then we will go back and say, let's say it's more than 24 hours or 48 hours. Nobody has purchased it. You have to increase the price or if you want to take the invoice out, you can take the invoice out.
00:36:14
Speaker
So, he said, we will put 1% and we had some market data to say that what kind of companies go as what way. So, we can suggest that and assist him in the price discovery.
00:36:27
Speaker
So what is the role of technology here beyond just like listing, like the listing platform where you can list? What else
Technological Backbone of Credex
00:36:35
Speaker
is the role of technology in this? There are a lot. In fact, you know, my first reaction when we was telling this to people, this is what we want to do, right? Most of the people are like here, this is undoable by technology. It is like point black people who has done hundi, they are like a hundi. What is undoable? What part of it?
00:36:54
Speaker
Because what you are trying to say is, as I said, right? So what you are showing the data is
00:37:19
Speaker
This is the previous data that's assigned in each one relationship. And then you are doing all this transaction through credits. So all this data coming together, all this data working together. And then there is a screw layer. So the payment is getting transferred, going and coming through this screw layer. And if I fast forward it to today now, we are managing over
00:37:39
Speaker
$500 million in payment that flows through us every month. So without technology, possibly with a team size of ours, in the backend, we will have a discounting system, right? Send that to a loan management system. We have a discounting management system in the background.
00:37:55
Speaker
where 95% of what we do is automated and 95% of what we do is completely at instant. So as soon as you do a transaction on a credit platform, you as a buyer, you go to a credit platform and say, I want to buy a chip card or a data invoice, you sign a contract, a digital contract, open up, you sign it, similar to your DocuSign kind of a thing or how to use OTP, you sign it and the money will flow from your account to the vendor account.
00:38:26
Speaker
So what happens is it works like a trading platform. So similar to your trading platform, if you are not buying it, the money is lying in your account. If you are not buying it, the money is lying in your account.
00:38:50
Speaker
and then that money comes back from the anchor, from the flip cards of the world, then the money will automatically go into your wallet again. Pass after, drop and have a drop. Okay. And this wallet would also be on your escrow account only? Yes, yes. All these things are only on my own. So my base of the entire payment is the escrow. Got it. Got it. Okay. Okay. So typically for a buyer, the journey would be they would sign up on the platform.
00:39:18
Speaker
So similar to similar to our trading platform, you come to the platform, you do a KYC, you create an account, you do a KYC, and then both the KYC are done. We basically send them a mail that your KYC is at the verification. We will file the KYC. Once the KYC gets verified, then one of our RNs will call the customer.
00:39:36
Speaker
brief them about key product, just two nuances of the product. So not everybody understands. So we explain them, we'll tell them the product. So this could be a 30 minutes to 45 minutes call with the investor. And once they are fine with this entire thing, then we go and take a ticket out to get a start. So initially handholding Chayoga.
00:40:02
Speaker
All those things we do for one or two transactions and then after that they start doing one soon. So then I guess once they would probably browse, they would find something they like, then they would load the wallet and then do the transaction.
00:40:16
Speaker
Correct, correct. So mostly what people does is they also start small sometimes, right? So they say like what does the buyer see when he's browsing? He sees the annualized return and the company name. Correct.
00:40:37
Speaker
Correct. So, he sees a company against whom the invoice is raised. He also sees what is the annualized return on it, expected annualized return. It sees the maturity period, 30 days, 60 days, 45 days, whatever it is. We also give a credit score. So, credit score is based upon multiple things, given the enterprise, the relationship, the credit score.
00:41:22
Speaker
whether they are financially sound or not sound. So, other, let's say, let's say, you can sign the agreement and you can sign the agreement and once the agreement is signed, then the money will move from your account to vendor account and you get an agreement signed by vendor, signed by seller. Now, you are the bigger holder of these invoices.
00:41:27
Speaker
And this is the short sort of summary on this.
00:41:48
Speaker
If the money is not in the account, then it will open up your payment gateway and or it will flow from. So, buyers can do fractional buying, like they don't have to put, they can just buy it. Yes, they can buy fractional also. So, they get a fractional, proportionate ownership on that and they get the prorator rights.
Investor Solutions and Risk Management
00:42:10
Speaker
So, everybody will get paid accordingly of that.
00:42:14
Speaker
Okay, this also then unlocks liquidity because of that fractional part. Can it plus diversification, right? Even bigger is diversification. So just a good proven practice to diversify your investment also.
00:42:41
Speaker
Okay. And do you also offer like a portfolio management, like that you can tell us that you want to put this much money and we will manage your portfolio for you. I'm again going to equity. So we don't do a portfolio management purpose. So there are different kinds of people, right? So there are, we have people who are ultra engineering, 55, 60 years old or old. Also their corporate regime were run by people was 55, 60 years old.
00:43:15
Speaker
At the same time, there are a lot of young H&Is and young people who sit here, but Flipkart Amazon, I'm good with.
00:43:24
Speaker
So there are different people, different views in terms of, so what we do is we sort of hand hold people in terms of getting what kind of risk you want to take. So in terms of building their portfolios, the RMs will help quickly. So somebody say, can I make 1 crore Dalmat? So you build a portfolio, which is a good diversified portfolio. Do you eventually see, one of these RMs are a cost center for you? You could replace them with technology also.
00:43:54
Speaker
Yes and no both because there's a lot of manual part also into it. So fundamentally these R&S are who are also working with these investors to maybe get larger wallet share of their wallets and also asking them to invest in it or maybe cross sell tomorrow to some other birds if we are launching. India may care energy and especially the clientele of the investor that we have.
00:44:17
Speaker
Ultra H&I is, if you don't talk to them, you will not feel comfortable. You cannot go completely online and say, yeah, it's robo-advice will not work, for example, right? And what is the number of investors you have on the platform? The closer you go now, we will be reaching possibly more than 30,000 now.
00:44:36
Speaker
And what is the average investment amount per investor? How much do they invest on average? I want to understand, are these really big investors? Are they medium-sized investors? They are mostly big. So our minimum ticket sales for investment is 3 lakhs.
00:44:53
Speaker
It's still a sort of evolving asset class and it still have some kind of inherent cues or inherent problem related to it. And for example, the inherent problem is, APNIBOLA 90 days but payment 90 days means 30 days. Because you don't control how the payment is coming. It's a third party used in bubble. All e-commerce companies started paying faster during COVID because they were joining more and more.
00:45:16
Speaker
Most of the people started buying online, so they need their supply chain to work faster, so they start running faster. In some cases, we have seen other way around. So the offline retain, what happened is the offline retain, which happened in 90 days, we went through FATA, who won 30 days, 50 days, because Sarai stores, one thing, nobody was paying, nobody was buying offline. So what happens is, a lot of times people start panicking. They say, we are running 90 days, 90 days, 94 days.
00:45:43
Speaker
So these are the nuances of the things. So I've understood the investor side. What about the seller or the vendor side now? So you present information about the vendor, information about the company.
00:46:00
Speaker
Yeah, we source it from the vendor itself. Then there are third party sites. He has to give you his books of accounts and... Financials, yeah, the book of accounts, financials, all those things. We can also source from, there are a lot of third party companies which gives over to these information. So we get all these data, but a lot of things are there, right?
00:46:22
Speaker
So I would in which basically consume this report and make it more readable. If a buyer comes back and say, I want more information, we are played with more information. Okay. And how does the Kedex score get calculated?
00:46:35
Speaker
So credit score is a proprietary score. As I said, ML based score, which works into multiple things. It takes into account the anchor's profile, right? Like the data goes profile. It also takes into account the vendor profile. It takes into account the relationship between vendor and the anchor. And then it takes into... How do you get this data, relationship data? This is the sales data. So sales data, you see that KHIA, Excel, the sales data, the sales data. The vendor key books read credit.
00:47:15
Speaker
So all those things, I also look into
00:47:22
Speaker
Then I also get a relationship between the Anchor and me. So Anchor and me means, let's say Flipkart came up as vendors. So how Flipkart is with me. Not only with this vendor, but overall how Flipkart is paying to all the vendors. And then I also need to let's say vendors go Flipkart Amazon. So how is Flipkart that vendor's overall relationship with Amazon even with
00:47:47
Speaker
Let's say, I'm not doing Amazon, but Amazon gives us a calculation for KURA, right? So, makeup was not our information, so I put this file, more variables into it, and then I, of course, get calculated. And this, of course, gets literally sort of balanced on a daily basis. So, just like I said, the cash flow change of the KURA is going up in terms of that.
00:48:07
Speaker
And this is what, a score out of 100? It was a score out of 100. We have recently changed our credit score to 0, which is on our scale of 1000. And what is a good credit score? A good credit score is anything above, let's say 650 to 700.
00:48:23
Speaker
Got it. Basically vendors who are consistent. I guess consistency would be the biggest thing. Yeah, it's consistency with me, consistency of the payment that is coming. So the cash flow is absolutely. So we have a lot of triggers, for example, right? So a lot of triggers are in place. If any triggers went to the after or the red mode, then it has an impact on the scorecard. If everything continues to go in green, the scorecard will keep on working. So we get a lot of times people who come back and say, but you know, like,
00:48:51
Speaker
Nami company and we always say these are this companies with us for like three years, four years, right? We have not seen any issues in the past and that's why this school is higher than that. We're just on voted and maybe it's a large name, but we haven't done anything with that. So all those things matters a lot. Got it. Okay. And how many vendors do you have on the platform today? Closer to I think 6,000 plus. Okay. So this.
00:49:14
Speaker
There are actually more buyers than sellers. It has to be because fundamentally, we are talking about H&Is, Ultra H&Is, FIs, and corporate registry, family offices, etc. Because of the H&I, Ultra H&Is, the population of the buyers will always be more than the seller. And sellers we are talking about is companies fundamentally
00:49:37
Speaker
And these two companies are mostly not a micro-enterprise. These are mostly a medium-enterprising and a little bit of asthma. What kind of turnover? On an average, we give them a limit of one one and a half crore. So one one and a half crore.
00:50:01
Speaker
And what is the average bill size that they, like foreign investor, you told me, but just say Bataasla won it.
00:50:20
Speaker
So, there is, there is, there is, bin size is slightly sort of a misnomer here. Why I didn't know because I have a logistic vendor just say 1000 trucks, right? So, each bin is mainly 5000, but what we do is we bundle all these bins together and present as a being of many few groups.
00:50:45
Speaker
But there's a wide fluctuation in it. We have got rents as much as 20 crore also. And we have got rents as small as few thousand also. So wide fluctuation in effect. But I think a better thing to look into the deal size. And deal size on an acreage of 50 lakhs.
00:51:08
Speaker
So, okay, so I understood vendor side, I understood the investor side. Yeah, I want to understand the risk element here. Who bears the risk? A delayed payment, we default. So what are the risks here? So there is one risk here is basically early payment. That's not a risk fundamentally, because you are individually getting the money, you are also getting some money in return. So if the IRR is constant revenue, that's not changing. So that is one. Second is your payments getting delayed.
00:51:38
Speaker
That is an inconvenience, it's not a risk as such. Yes, it's an inconvenience, but I'm just stating it as a risk. The second risk is your payments get delayed, right? So your payments get delayed, so what we do is, as I mentioned with you, we keep a margin, 20% margin, right? So what happens when the payments are delayed, but you actually get paid, the 20% margin is sufficient for me to take down into it and still get the promise into the investor.
00:52:02
Speaker
So promise in winter plus any delays there's a house baby give them 1% additional or monthly basis. So basically we said 90 days for payment other 120 days yoga and 90 days we have 14% promise of the 120 days most of all getting 4% and you get 5%. So that way again, it's not a risk just a, you know, you get more money out of it. The third risk is and the major risk is basically keep payment beginning.
00:52:28
Speaker
So, payment hasn't happened. Now, payment is not happening. Again, let's break it down into multiple things. But then, every invoice that comes on our credit platform, we verify it with the amper. Otherwise, the invoice can't locate.
00:52:51
Speaker
So, that is gone. The second is, there is a, the payment, there is a trade dispute, right? So, trade dispute, the type of trade dispute generally gets solved in terms of it will get delayed, but it's not the treatment. The second part of trade dispute,
00:53:12
Speaker
Your quality issues, yeah? Quality issues can happen if it is for someone based on the approach. Eventually, the payment will happen. So again, it goes into the A payment and you still get additional money. The third thing that can happen also on trade dispute is, let's say, the major dispute is that if the payment is not there, right? But my arrangement with the anchors are always that not only you will do the payment for this invoice, but you will do payment for all invoices into this as well.
00:53:41
Speaker
Right, so let's say, invoice number 1, the payment here, I am a pass, but in also number 2, the payment here, I will take the money off it also and pay it to the end. Right, so it will probably solve you. Now, third part, why payment has not happened, is let's say, key anchor as my bank account.
00:53:59
Speaker
And it's an incorrect one that is again a very rare case. It's mostly 90 days. So 90 days, a company going from good to worst is only possible when there is a fraud that has happened by multiple agencies, including auditors, including rating agencies. So once in a blue window, they say a few who are in the past, you know, few companies.
00:54:25
Speaker
But what we do is we also do our own rating agencies. So we don't rely entirely on the external rating agencies. We do our own score by the scoring, which looks into account a lot of more recent data rather than just a grade score. So grade score is also part of it, but we look into a lot of, it's like a 50 points score, which looks into the score to see that. So even if companies are AAA rated, I mean declining because my score is saying that it's not worth doing a company.
00:54:54
Speaker
In the worst case scenario, let's say the enterprise has went bankrupt also, the anchor has got bankrupt also. We have a dual recourse mechanism. So what happens is I can still go back to the weather and say, come on back.
00:55:05
Speaker
So, I can still go back to it. So, I still can go to vendor and vendor can give me money. Now, for actual default to happen, what will happen is the end. Vendor also has to go bad when the end could become bad for. But then, what you are talking about is that the anchor also has to go back up, the vendor also has to go back up and these two events have to happen simultaneously within 90 days period.
00:55:28
Speaker
which makes this entire event extremely rare in the entire thing. Apart from that, maybe there is also a risk of fraud, right? Which is like, you know, people just, you know, colluded and did some kind of a fraud. That is the whenever that happens, we at that time, we identify it, right? So we have put up a lot of practices inside it in terms of it. And whenever it is possible, we identify the investor and give them the money back.
00:55:52
Speaker
As far as possible, we try to prevent any kind of default or risk that can happen to the buyer. But seeing so, there is always one or two cases which can go here and there. On our legally-bounded papers, the risk belongs to buyer. The buyer takes the credit risk. The final risk, let's say, anchor going bankrupt, or a vendor going bankrupt, or both of them going bankrupt, that is the risk which still the buyer is carrying. And for that risk,
00:56:19
Speaker
It is the same as buying debentures, your bond. It's the same risk as buying bonds or it's the same risk of buying the stocks also, but those are the risks which the buyer is carrying. And what is the percentage of total? Is it like 0% right now in terms of default?
00:56:40
Speaker
Not 0%, not 0%. So in the initial days, we have seen few frauds that has happened where we identify and given the money. Post that we have seen few of the cases in pandemic, initial days, we have seen some issues. Future is, for example, this is still in red for us, but there we have started paying and our people have seen the money coming back to them. Far from that, there is one case which was fundamentally which has hurt us a lot, which was the HK scenario, which I was talking about. It was Fox and King.
00:57:07
Speaker
the pops and king was we did a few years back and that was a rated company which went to deleted company almost overnight and and the vendor was also completely dependent on the fox and king so vendor also went bankrupt so that again the case is going against nclt and we are trying to recover money out of that we have recovered in one of the vendor case where the vendor was still was ready to pay and the vendor is spreading we are solvent and they paid it in another vendor case is still nclt king but it will be like
00:57:35
Speaker
0.0 something percentage. Yes, yes. Over on from the total dispersion perspective, if I see, I think it's around 0.013 kind of a percent. What are the requirements from a vendor? Like a vendor needs to give you his balance sheet, he needs to give you his books of accounts.
00:57:54
Speaker
It's balance sheet, et cetera, mostly book of accounts and all. We can still pull it from MCA, but it's just on senior set, we do a cross checking terms of that. And apart from that, what we need is this undertaking agreement to be signed by the anchor saying that, yes, they will move the money into my account, as in the high school account. And without our agency, they will not change the account.
00:58:14
Speaker
Basically, that vendor's bank account is updated in the Anchor's ERP. So any and all payment to that vendor goes to the escrow. It goes through the escrow account, correct. But the vendor can choose which one to choose, which one to choose and which one to choose. It's completely democratic. The vendor can choose any one to choose, which one to choose from, which one to choose from, which one to choose from, which one to choose from, which one to choose from, which one to choose from, which one to choose from, which one to choose from, which one to choose from, which one to choose from.
00:58:42
Speaker
pass through. Exactly. So, we had again, argument bound with that. So, in a vendor site, maybe we signed a nugget, where vendor could be saved within T plus one days, as soon as the money hits our record, within T plus one days, the money will go back through.
00:58:55
Speaker
So what is the, do you also acquire the anchors? Like what do you need from an anchor? What we do is we have our two means of acquisition. One is basically where we acquire the anchors. So we go to the anchor, do a strategic type with the anchor, and then started reading the vendor's supplier. And then we help all the suppliers on it. The secondary supplier themselves comes to us and you know, on get onboard it.
00:59:18
Speaker
So both the mode is there. Both the cases, the onboarding is different in terms of first anchor comes and then the vendor comes versus the vendor comes and then the anchor comes. But the rest of the warnings remain the same. What is the difference in onboarding? So in one case you went to a anchor, you went to a strategic payer and then you given the anchor that we can help all your suppliers and vendors in terms of recent months.
00:59:42
Speaker
So, what it gives to the anchor, it gives them that no vendor and supply will come to them asking for KF, the deposit, the deposit, the deposit, which is a nuisance for most of the anchors. And once that tie up comes, then we see a large chunk of vendor suppliers coming to it. The second is basically your suppliers comes on it. And in this case, the vendors don't need to get that agreement signed with the anchor, because it is a central level mere agreement signed currently.
01:00:07
Speaker
Correct. Many are already central level. Correct. Correct. Correct. Correct. And the second case, the supplier comes to me directly and then the supplier goes and we do the entire onboarding and then we work with the supplier to get the access onboard. So we see a lot of network effect here. Okay. Okay. I think I said, many people give us the supplier. The supplier doesn't give us any access.
01:00:29
Speaker
So he takes me to that anchor and he tells the anchor, I worked with him with this supply anchor. So it works very well. Can you please get him inverted? So we get a lot of effect coming into playoffs. So do you have like a sales team, which like, how do you do your acquisitions? We do. So we have a large sales team, which does the acquisition. So both on the anchor side as well as on the supply side, they create the acquisition options. Okay.
01:00:56
Speaker
So, what is the regulation here? For example, a stock exchange is regulated by SEBI. So, you are also in a way like an exchange or a market. So, what kind of regulation are you covered by? So, I think we have submitted to RBI long back our entire working, when we started up simple. This is what we are trying to do.
Dialogue with RBI on Regulation
01:01:18
Speaker
And of course, that we had multiple rounds of discussions with IPI. I think, as I said, we are possibly getting part of an area which is not getting regulated. But however said so, in our last discussion with IPI, they were very clear that they want to regulate us.
01:01:33
Speaker
We also want to get regulated because it gives us a lot of trust with everybody, right? People will start trusting us more in the second and it's more unselfish thing, but it also create a lot of barrier to entry for anywhere to come into it. But yes, I think it's a right time to get regulating. The only request that we have done to the regulators is that do force-fit us into one thing, but basically create a regulation for what we are doing and force-fitting us. There's a lot of benefits that we are providing that
01:02:03
Speaker
indirectly possibly we are helping you know 6000 MSME and we have created more than one you know more than five lakhs ten lakhs jobs i don't know even during covid scenario we were one of the only financiers at that time was still this person was still helping MSME
01:02:21
Speaker
So the request was always to RBI is to not force-fit its asset to any round peg into square hoods kind of thing. But create something which is what we are doing, right? And then regulate. So we are self-compliant. We do all the KY's in the proper way, what RBI asks for all regulated entities. Our entire fund flow is completely digital. So there's no way cash can enter into it. So from that basis, all these things is a complete audit ring. All those things are there. Tell me about your funding journey. Like when did you do your first fundraise?
01:02:50
Speaker
So we raised the first fund on buying venture partners in September 2015. And then we raised our second round. This was like pre-product 2015.
01:03:01
Speaker
Not pre-product, but as I said, 28 June is when we did the first transaction also. So few transactions have been done, but you can still say it's a seed round. It was initial days of it that was happening. So that was our first seed round. Then we did our second round with Sequoia in again September 2016, I think.
01:03:20
Speaker
considering we are an extremely asset-like company and I don't like a larger team like a thousand member team, we keep it a smaller team. We made the raise for the urge to raise another money for a good amount of time and then we did that for a round just before pandemic in December 2019.
01:03:38
Speaker
Okay. How much did you raise from Tiger? Tiger, we raised total in 25 or 26 million. Amazing. And what was your valuation or what is or was like whatever is the number that is available? So we value at that time, we got valued at around 1.56. So you said you have a small team. What is the size of your team? 145, I guess, to be more precise. We can say 1.50.
01:04:04
Speaker
How many of these are doing that role, like helping the investors? Both the side? On the investor side, on the investor side, six member team. You have a separate team for sellers also, like the vendors and RMT. Yes, we have a separate team for vendor side is a larger team. There is a total 25 member teams on the vendor side of it. And the investor side, I think we only have six member team.
01:04:28
Speaker
How is that? Because you have a smaller vendor base and like your investor base is 5x of your vendor base. Yes, it's also to do with the kind of persona of both the site. As I said, most of the people on this side is family office, FIs, corporate, ultra H9. So these are people who are very conversant with tech as a platform. Okay, so they're like sophisticated investors.
01:04:50
Speaker
Yeah, they're sophisticated investors. They know they want your time, mostly your phone. So you call a phone and you'll send message on WhatsApp. In case of a vendor site, it's mostly like they want to see your face. They want to meet. You want to go and meet. You want to introduce them to the platform. For them, they're not savvy guys. So it's a lot of push that is required in terms of bringing them on boards and what you want to do. So this team is also doing the sales or there's a separate sales team? The acquisition.
01:05:18
Speaker
No, both the teams are doing the same also. So sales plus RM both, they do the same thing. So it's the same plus account management or the relationship management. The rest would be like technology and central functions and risk. Yeah, the biggest one is technology. Technology is closer to what I think maybe 50-60 member team tech and product included.
01:05:38
Speaker
and then around 15-16 will be marketing team and because we rely a lot on marketing but to bring us the thing. I think the rest is our six members, six seven members team and then operation team is there which has been another 10-12 member team and yeah then there is legal, finance, a charge and useless people like we who doesn't add any value which I always say support.
01:06:04
Speaker
Okay. The marketing team does like, they do like Google, Facebook ads to get vendors. Yeah, both online and offline marketing partnership management kind of starts to tie up all those.
01:06:16
Speaker
So for example, let's say if I have to tie up with a larger partner, say for example, an IFA or a large BSA, right? Or I want to do a tie up both arrangement also, right? So I can give them my vendor base to process and they give us their customer base to process. All those kinds of things, events, ER, content management, you know, all those activities is part of it.
01:06:37
Speaker
I also have a team called NPDS team, which is new product development strategy, which mostly works on bringing out new product innovation. Do a quick MVP to see that if the product is scalable, if it is scalable, then you scale it up. And the idea is to take a product from zero to one and one to let's say 2025. And after that, you ship it out to full-fledged unit, where you hire a team and set it up separately and all of that.
01:07:04
Speaker
So, what are some of the new products that you have launched? Besides this core product? Yeah, apart from this core product, we have also launched Export-In-Core Financing relationship.
International Trade Finance Expansion
01:07:15
Speaker
So, we got a license from IFSCA in Gift City in Ahmedabad and we are one of the four companies to get our license to launch our international trade finance services platform. So, we set up a team in Gift City where
01:07:26
Speaker
We have also as a team in Singapore to report them in terms of its ideas to do the entire export import financing part of it. The same problem again in the export is a much possibly bigger segment because and the problem is much wider because then to ship the product and wait for more time to further. So that is one part that we have started scaling up very well.
01:07:47
Speaker
And the model is the same, like the vendor will get the anchor to sign an agreement, transfer to escrow account. Correct. It's just that we have some changes. Yes, account changes are there. In some cases, we also do insurance. So there are insurance players who ensure that trade is enabled based upon who there is a buyer in the country. So there are international trade insurance guys who can launch. What is this insurance against, like in case your ship drowns?
01:08:14
Speaker
Not exactly. It's most around. Yes, it can happen about shipped down to yours. But it basically all the trades get insured depending upon who is the buyer. So if the buyer is this and then the seller has this profile, so the insurance company will insure the trade between them. So you can also get the trade insured and then you take that. What are the risks they are insuring against?
01:08:36
Speaker
So in this case, ensuring there is mostly once the product is got shipped, then from end to end, they are ensuring that the buyer is worth to pay them off. If the buyer is not worth to pay the money, then they will pay. So they have that arrangement and all those kinds. So they are like billions of dollars companies who are doing just this. So it works on both the side. It works on also account. It can work on line of credit later also that comes from there. It can also work on these insurance companies. So different formats are then slightly different in terms of it.
01:09:07
Speaker
And an export import, what we generally say is, whatever purchase, we have the lowest cost of capital in the market. So we source the capital, not from India, but mostly from abroad. And that's, and there's no hedging risk because we keep the currency missing on it, right? So that way we are able to get, and we have some very good people who are good people to very good types through which our source of capital remains.
01:09:32
Speaker
In a lot of cases, we have given people offer, which is anything from 100 to 200 pieces point less than the best offer they have put in the market. So it's a clear that, you know, the link proposition that we are doing part from export. So for example, like say if Walmart is buying something or Target is buying something from an Indian vendor, then that invoice, you will find a buyer in the US only because they would already know Target, Walmart, and that invoice is payable in dollars.
01:09:59
Speaker
Not necessarily, I can find out why are in let's say other country, let's say Japan also. Now Japan is at a perpetually 0%. They would love to buy something at 4-5%. They will buy it in dollar and I will return them the money back in dollar. But 4-5% is like what's in there.
01:10:15
Speaker
So, this become an easy deployment in this kind of, and Japan has like lots of money, right? So, you can get institutional buyers also. Mostly, an export import you get institutional buyer who has like a city to put a lot of like larger chunk like 100, 200 million dollar, 500 million dollar kind of thing.
01:10:31
Speaker
So that this export business, I'm pretty sure would eventually be much bigger than your domestic business. India has a boot the market. Very frankly, we started with domestic thinking about that and it's moving to export. But the domestic itself is such a big market in India and there's a bonus tool.
01:10:48
Speaker
Even right now the exporting port is our focus is mostly by export from India. So we are not as one into other sector, but yes, considering it's a domestic consumption story, this is international trade. And if tomorrow we will go and say that we can look into any countries, not just one live in India, then of course it become a bigger chance.
01:11:08
Speaker
Okay. Okay. What other new products are you working on? Other than that, what we also started is, so we were into the supplier vendor side of it. We also started looking into saying that we will become a supply chain finance, full-fledged supply chain finance. So our
Vision for Global Supply Chain Finance
01:11:22
Speaker
vision of the company is to become an operating system for
01:11:25
Speaker
supply chain finance in the entire world. So, what I mean is by operating system and supply chain finances, we are doing wonders for suppliers. We started doing dealer distribution, retailer makeouts also. So, for an anchor, we are doing the equity account paper. We have started doing the account in simple also. We have started doing their export importance also.
01:11:44
Speaker
And why OS is because I'm not putting my own capital, right? So I'm more like an operating system where anybody can plug in. So this company can get plug in, a lot of this company can get plug in. Anybody, a bank can get plug in. I'm not competing with the bank also, so everybody can get plugged in. So what we created is sort of unheard of in a channel financing model, a distributor financing area, which is
01:12:06
Speaker
Now, we are calling it as a BNPL for B2B payment. And why we are calling it as a BNPL is fundamentally because of the crack instant dispersal here. And what I mean by instant dispersal is the end-to-end, we can do the dispersal in less than one minute. So why BNPL is because I think it's more like a payment gateway, right? So it will be connected at your B2B market basis, at your VTL management system, at your VTL management system. Even let's say Metro cache and carry, it can be at your checkout counter.
01:12:36
Speaker
where you can just scan the code, do some smaller paper upload, and by the time you reach there, you will get the money in the account. So money in the account means you get a sanction letter, you sign the match, and all those things happen. And then when you buy, the payment directly goes to the seller who sold you. So currently, what happens is mostly it's cash and carry business. So what we are now providing is saying that you engage me at your data management system, or your data means ordering from your DNS system.
01:13:04
Speaker
and immediately he can check out saying that, okay, I want to check out using credits BMP and credits, he does the RKYC checks and immediately we give him a limit. Against that limit, he goes and buy the product. So what happens to the brand is now, since the dealer has got access to the credit, they can buy more, right? So earlier we were saying, let me buy what it is for because it's a cash and value business, I can only buy this one. But when you give them credit, they will say that, okay, let me buy more because
01:13:30
Speaker
See, what is happening today in today's world is everybody's competing everywhere, right? So, even the dealer distributed retail, they cannot afford for things not to be there, right? Because there is jepthos of the world, 10 minutes delivery and 30 minutes delivery and 45 minutes delivery is coming. So,
01:13:46
Speaker
No retailers want to give an option to the customer that they should go and order online. All these things can happen within one minute. So you don't need to wait for one month for the dealers to get a money and all those things. And whatever kind of taking conditions required, we can provide it too.
01:14:02
Speaker
So in that side, we are mostly working with banks and NBFCs. There are no ultra H&I, H&I, corporate agencies. So there's mostly through banks and NBFCs that we are doing. So in this business, the dealer is getting like a zero percent financing because the cost is borne by the seller.
01:14:21
Speaker
Most of the cases, almost 80%, the dealer distributor is not in the cost. They are getting a zero percent. But the benefit to the brands are that brands can sell more. So, we have seen almost 30% more buy by the existing buyers, dealers and distributors, while they are attracting almost 40% new buyers, new dealers and distributors to buy from the brands.
01:14:42
Speaker
So that's the benefits of that. And so overall, almost 2x increase in sales is happening for a particular bank if they connect with us on the dealer. And also there are a lot of hybrid model that all sides. So for example, some brands are working where they say up to 60 days of interest, they are bearing. But if the dealer wants to take more than 60 days, then the cost will be borne by the dealer. How do you do the risk at the writing of the dealer or who's taking the risk? Is it the brand, the seller or the dealer?
01:15:08
Speaker
Yeah, no. Mostly banks and NBFCs are taking up their risk. It's not the brands that are taking up their risk. But with that, underwriting is completely automated. So we have our in-house risk. This is an engine. We code the entire risk. This is an engine. So it takes into account your credit bureau score. It takes into account your sales data. It takes into account your bank statement analysis also gets done. It looks into your
01:15:32
Speaker
So that vintage and sales data is given to you by the seller, like a Metro cash and carry would share that data with you. Correct. So sales provider provides me the sales nature. I also get GST, so I'm connected to GST also. So I get his overall sales, not just the sales within these buyer seller, but the overall sales of the buyer also. I get bank statement analysis, all this time being done and on the fly and within one minute you get the assumption.
01:15:59
Speaker
How do you get bank statement? Bank statement has to get uploaded or they can just log in into net banking through my portal and we get, we access the bank statement. Yes. Okay. And this is because you need to disburse in under a minute. So this you can't do through a marketplace portal because that will take too much time. So this is therefore within VFC.
01:16:18
Speaker
Yes, exactly. We need NVF3 to bind into it first.
Innovative Credit Evaluation and Approval
01:16:22
Speaker
And it's also because one minute is mostly got possible because of our internet engine that we have created, right? So there is at least five different data source that we are connected to. And then the entire data is getting churned by our proprietary decision engine. So everything gets churned in terms of what are different modes to print. And runtime, we also score in, right? So there is a
01:16:41
Speaker
Another score that runs in is the BMPL score which also gives some kind of a score and based on a lot of parameters we look into and say okay we are approving. So once approval happens sanction means any sanction and that the disposal happens to the seller directory.
01:16:56
Speaker
Okay. Okay. And that, there is a line of credit from NBSC through which that sanctions. Correct. Correct. And you have like a first loss default guarantee with the NBSC? In some cases, yes. Yeah. In some cases we have given them the first loss default guarantee. In some cases we are not. So it depends upon how, what kind of arrangement that you want to do. So if you want to go to lower rates, then you have to give the first loss default guarantee.
01:17:22
Speaker
It's also that sometimes, you know, bands and NBFCs are not against it to take that risk. But you are very confident because of maybe additional data that you know, or additional information that you know about the industry. So we are willing to take that loss and want to build up that book about it. So what we do is we see for some time, and then if the data looks good, then we go back to the NBFCs and say that, you know, this one's FFTG, now we see it doesn't mix, and so we can remove it. So all those things can be overcome. Got it, got it, got it. Okay.
01:17:51
Speaker
And how much do you earn in this, like the spread is shared between UN and BFC? So again, answer not. The NBFC has been shared by spread in terms of it. So there could be some base rate for the NBFC over in the birth tactic and it's shared between us and NBFC.
01:18:07
Speaker
And what is the cost of this, like 12%? 18%? Google has low as 10% here, do as high as 24%, like 4 in the world, 24%. And this totally depends on the distributors. Because for time I think the money is going to come from the dealer distributor retailer, not from the anchor. Okay. And what else?
01:18:28
Speaker
What are their products? Apart from that, what we also did is possibly we are the only fintech company to determine that.
Tech Product 'Capital' for Supply Management
01:18:34
Speaker
We also created our tech product, which we call it capital, which is a EPAR team. So what we do is we consider anchor is our main pillar against which we positioned everything. So we said to anchor, to manage his vendor supply side, his delay distributor side, export input side, we created a tool to manage his income, people, site and account receivables.
01:18:52
Speaker
So this is a tool which we give to the Anthos event. You plug this with your VRP and all the data you can manage it at one side also. So not only for financing and discounting, but it can help you the entire API. So let's say they want to do an early payment, they are doing discounting thing. They can do it. They can do repensulation. They can do TDS. They can do JSTK. They can do all the BI on top of that, a lot of forecasting on top of that. So there's a tool to manage your entire cash flow.
01:19:21
Speaker
And if there is a cash deficit or cash surplus is there, then we will come back and say that there is a deficit or there is a surplus, we need financing.
01:19:29
Speaker
And this is like a free tool, right? Because you are monetizing this through the lending. Correct. It's a free tool that we are giving a lot of customers. Of course, sometimes there is an upselling that is also possible. So for example, we are given an EAP and AR, if they need, there could be an upselling, which will charge them separate. But mostly, we have kept it as one side as a free tool. What do you want to double down on? What is your key focus area for the next couple of years?
Growth in Financing and Quick Approvals
01:19:59
Speaker
Yeah, I think my invoice discounting is pretty much said it's a growing business which continue to do. Our current focus is on the BMPL for B2B, which is the daily distributed retail financing. And the second is the export import piece. So these are the two things which we are mostly focusing upon. The BMPL for B2B, you also have players like I think PropCap, ePayLaters, these are some of the players in that space, right?
01:20:23
Speaker
Correct. There are a lot of players also in that segment, but I think what I said is something what we have cracked is less than one minute and that's why we have seen a lot of companies coming to us. A lot of companies, which we have initially started it six months back, so it's not a large time that has happened, but the initial customers who have worked with us, they actually came back to us and told us, they literally called me and they said, Manish, we were working on two receptions.
01:20:48
Speaker
One assumption is that my sales increases and the second assumption is that my daily distributors are happy and both assumptions are pretty much validated. So now we want to double down or triple down into it. So then what else to do? But I don't want to work with a bag for a one-month period. So yeah, time is essential. I cannot have one-month but other things. So your entire process looks very fine. So can I work with you? That one-minute thing is definitely a big pull.
01:21:10
Speaker
yeah and what we are doing is in the end we are also working with bank but the entire one month negotiation and all those things we are doing with the bank so the anchors of the centers are not getting visibility to that side of it right so it's like i'm in the dirty one but i understood getting the customer experience which i promised you to do
01:21:28
Speaker
Essentially, you are like how a company can plug in a payment gateway. So similarly, they can plug in BNPL. Yes, exactly. So that's why I say I am like an ABA, right? You plug me anywhere and at point of saying you can just check out and then say that I want to pay through, but it's BNPL. Amazing. Okay. What is your revenue number? Like what is the number you track? Like is it disbursement? Is it like what is the amount financed?
01:21:50
Speaker
Yeah, so the different parts are different numbers that we track. In voice discounting, we track the disbursement that we do. You know, what is voice discounting that we do. So we currently look closer to the round, what it throws on that side. In BHPL, we track basically the total portfolio values that we have on the page. And in export, in port also, we... What is the portfolio value there in BHPL?
01:22:14
Speaker
We are closer to now around 100, closer to now 100 crores here on that side. And in export in both sides, we track the total sanction that we have been so far in terms of it. So that is last month, I think $20 million or something that we did last month. And what is your revenue?
Revenue Goals and Future Products
01:22:33
Speaker
Like what do you earn?
01:22:35
Speaker
Yeah, we are right now doing an era of closer to around 5 million possibly. What do you see as your growth rate? By 2025, what will you be at? What do you predict? Yeah, 2025. Hopefully building to 2025 will do closer to a revenue-wise roughly around 70 to 80 million. Wow. That's a massive jump.
01:23:03
Speaker
Yeah, because we started two new products, right? Exported both PS and BNPL, this inside. So export these, my numbers, my overall numbers will be much larger and it's a dollar, right? And so I would earn the money in dollar rather than converting man out to dollar. And BNPL is just because of a sheer volume of it. And it is just the kind of currently we are tracking so many companies are reaching out post that my team has to literally create a queue.
01:23:31
Speaker
So we created a queue system, we have to ask anchors that, you know, please wait, we will come because we never planned for it. And we are now hiring people, there are few people as to supposed to come and join us. But so we have to ask them, they said, it's okay. And we are literally after cheering, we have written it saying that, okay, this is a large brat, let's call them immediately. Wow, that's a good problem to have. Absolutely. So hopefully, let's see, keeping my finger crossed that we will reach here, but I don't even try that much.
01:23:58
Speaker
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