Ambit Finvest Pvt Ltd, one of the fastest growing non-banking financial companies (NBFC) in India, has charted an aggressive growth story:
Ambit Finvest Pvt. Ltd., which started with just 20 branches in FY19, has plans to expand its branch network to 100 by the end of the fiscal year. The company is betting big on the MSME lending business evinced by the fact that its MSME loan portfolio has grown at a CAGR of around 62% over the last three and a half years.
Vikrant Narang, Deputy CEO at Ambit Finvest, adds details: “We are executing a well-planned operational and tactical strategies to aid our expansion plans. As a first step, we are expanding our distribution network based on carefully curated market intelligence, empowering credit managers at the lower end of the spectrum and strengthening our processes and systems by embracing new age technology.”
Interestingly, Ambit Finvest’s Transformation journey began in the year 2017 after Narang joined the organization. “While we were building a structured corporate lending book and we wanted to scale and granularize our business.”
Going Granular
Ambit decided to look beyond the traditional B2B business model and tap opportunities in the MSME segment, with a B2C business case. “Since it was a new business model, we were apprehensive. But the acquisition of Finmax Credit and Finance Pvt. Ltd. and Sanjay Agarwal’s addition to the team in 2018, provided us with the impetus to jog ahead.”
The acquisition increased Ambit’s people strength by 150 and added a portfolio of Rs2 billion to its books; with an average ticket size of close to Rs5 million. The 2018 liquidity crunch triggered by credit default by a large NBFC strengthened the company’s resolve to build a strong MSME portfolio.
The next year, in October 2019, Ambit decided to raise external capital for business expansion. Adar Poonawalla, CEO, of Serum Institute of India, came on board with a 25% stake in the business. “Our accounts were credited with the equity capital on March 5, at around 11 am. At 2 pm, a large private bank went into moratorium. Thirteen days later, on March 18, the Prime Minister announced lockdown because of covid-19,” says Narang, describing a chilling sequence.
Geographical Expansion
Business-wise, Ambit had about 20 branches at that time and a small portfolio. While the lending industry was looking at a volatile economic environment, Ambit Finvest had the advantage of substantial growth capital by virtue of its timely equity raise. “We repaid the bank loans and created a strong goodwill in the market,” Narang said.
During the 2 years between March 22, 2020, and March-April 2022, Ambit invested in technology, processes, and expanding its distribution franchise. It increased its branch network from 22 to 55 and expanded it footprints to 11 states. These included flagship branches in Delhi NCR, Punjab, Chandigarh, Haryana, Rajasthan, Gujarat, Maharashtra, Andhra Pradesh, Telangana, Karnataka, and Tamil Nadu.
While expanding its branch network, Ambit scouted tier-2 and tier-3 cities with a population of 1 lakh to 20 lakh. To deep-dive into these markets, the company started branches in Bhayad, Borsad, Kheda, and other smaller towns.
During the covid-19 triggered pandemic period, the company also ventured into the financing of used vehicles. “While catering to MSME business loans, we sensed a high demand for financing of used vehicles- especially used commercial vehicles, cars, and tractors, both in urban and tier-2/3 cities. We decided to tap the segment, and today we have scaled it up to a book size of more than Rs1 billion.”
Shift in business strategy
Strategically Ambit Finvest decided to rundown its corporate book, and focus on scaling up the MSME lending book. “The corporate lending business was profitable. We still have about Rs1 billion worth of corporate loan book. However, because of the equity raise and our growth strategy, we focused our efforts on building our MSME lending business. While our MSME lending portfolio has witnessed strong growth, the ticket sizes have also got more granular – currently, our average ticket size is around Rs1.2 million,” Narang added.
The company currently has 3 major umbrella products in the MSME lending business – Vyapar Loan (loan against property), Udyam Loan (unsecured business loan), and Parivahan Loan (financing used vehicles.) Each of these umbrella products has multi-level variants catering to the unique demands of various customer segments leading to a focussed micro-market strategy. The ratio between the secured and unsecured loan portfolio is currently maintained at 70:30. “The strategy has worked well for us. Not only have we witnessed a strong growth, but also, we have been able to maintain a strong credit profile.” As of March 2022, Amit Finvest had a gross yield of 15.7%, NIM of 11.2%, and net NPA of 1.8%.
The distribution strategy is focused on a multipronged approach of expanding the branch network in a hub and spoke model and forging strategic sourcing alliances with revenue/risk-sharing arrangements enabling a deeper reach at a low cost.
Ambit Finvest, recently, has also launched its lending app with the capability of straight-through credit delivery with near-zero human intervention.
Commenting on the new business model, he said: “We are an omnichannel NBFC, and we want to develop multiple origin points. These give us the scope to choose the best proposals to underwrite and the flexibility to expand or scale down in tune with changing market dynamics.”
Empowering Teams
The NBFC also streamlined its internal team structure and processes to beef up its underwriting machinery. With the national credit head overseeing the overall business, credit managers at the branches, states, and clusters act as local touchpoints. “We believe that the credit manager at the lowest end has the best understanding of the proposal. So, we have empowered them with an underwriting authority up to a certain ticket size, provided there are no critical deviations,” Narang said.
Embracing Technology
Over the last 2 years, Ambit Finvest has also undertaken some critical digital change projects including implementation of CRM and sales automation tools, modernization of loan origination and loan management platforms, and implementation of data analytics platform.
The NBFC is leveraging advanced applications and tools to streamline the flow of information and integrate critical processes enabling a seamless customer onboarding experience, faster turnaround time, and a low-cost credit delivery. “Technology simplifies channel and customer engagement, automates statutory mandates and industry compliances, and provides real-time access to data enabling quick decision making,” says Narang.
Narang, however, said that in secured loans, financial assessment could be tech-enabled but processes like property assessment, and creating mortgage collateral still require physical verification. “I do not think it has really happened where the entire deal was concluded at the click of a button, especially if you are doing a secured lending product. But we will be able to cover most of the ground in 3 years and things will be vastly different. In the case of unsecured loans where the ticket size is smaller, loans are being disbursed based on information obtained via video KYC and other sources.”
Further, Ambit has tied up with used car marketplaces like Cars 24, and Spinneys, among others, to grow the vehicles business vertical. “We get many leads from these marketplaces, which add to leads from our large in-house sales team and cold leads from our call center,” he added.
Co-lending, The Way Forward
Ambit has entered into a co-lending agreement with Union Bank of India. Although at an early stage, the NBFC and the bank have put standard policy parameters to determine loan tickets, tenure, lending rate, and risk evaluation parameters.
“With policy thresholds in place, the project is taking shape but will take some time to pick up. We are optimistic about this product and see huge potential in such strategic partnerships,” shares Narang.
Spin in the business model
As Ambit Finvest charted a new growth story, it also drew new roadmaps to map the journey. Narang said: “We do not believe in a spray and pray approach. Whichever institution we partner with, we want to serve the expectations set up in the initial phase. For example, if we set a target of Rs2 billion business per annum, we will develop processes and enable our ecosystem to meet the target. Together, the partners must set realistic expectations and build ground rules for a successful partnership. Conversations at the drawing board should revolve around a cohesive, collaborative approach.”
Narang emphasized that businesses would build capacities based on 2 significant standpoints. From a customer perspective, Ambit is planning to deep dive into data analytics to develop processes to provide a seamless experience to the consumer. “We aim to remove duplication and avoid repetitive questions so that the loans can be disbursed without delays. From an economic standpoint, customers are willing to pay higher for faster services.”
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