Their original idea was to help credit-challenged individuals become loan-eligible. Soon they realised that the field was much bigger than what they thought it was. And, more importantly, digital was the way to go — something they were not familiar with, and that is how the third member of the founding team came into the picture.
Ranjit Punja, 52, had been with Citibank for over two years, with his last assignment based in New York, when he realised he needed to do something else. Along came R Sudarshan, a former colleague at Citibank, who had moved to an executive role in eServe, a leading BFSI business-process outsourcing unit.
As Punja recalls, after several late-night discussions, the duo decided to start CreditMantri Finserve Pvt Ltd to help customers improve their credit score and access loans. They brought in Gowri Mukherjee, who, with her wide experience in Citibank and Standard Chartered, aided their process of going digital.
The story so far
The Chennai-based CreditMantri, CEO Punja says, has three segments of customers — the credit-healthy, the credit-challenged and the new-to-credit. The venture was set up in 2012, and in the initial years, growth was slow, he says. It was self-funded; once it became digital, the pace of growth picked up.
In June 2015, CreditMantri raised about ₹15 crore ($2.5 million) in Series A funding from IDG Ventures India, Elevar Equity and Accion Venture Labs. “A lot of upfront money needed to be put in to attract customers to our website. I wouldn’t say we pivoted our business. We expanded the scope of our business.”
Now, CreditMantri uses data and technology extensively to make credit possible to all segments. “We can pride ourselves on being India’s most inclusive credit facilitator,” says Punja. He is even more proud that the venture has exceeded its own goals. When it raised the funds, it hoped to have 1 lakh customers in the first year; and by that yardstick, the venture should have 2 lakh customers by now. “In the time-frame I am talking about, we are at a million customers.”
Series B of $8 m
CreditMantri is now in the market to raise a Series B round of over ₹50 crore ($8 million), and has just signed a term-sheet with a potential investor. The three existing investors are expected to participate in the second round. “That will give us the platform to expand the business,” says Punja, a postgraduate in commerce from Chennai’s Loyola College and an MBA from the University of Wisconsin, US.
Apart from increasing the team size, from around 75 to 130 in about 18 months of getting the second round of funding, CreditMantri will use the fresh funds to strengthen technology and build on the capability to analyse data. It also hopes to jump its customer base to around 6 million by October 2018.
Business model
According to Punja, CreditMantri adopts a lender-pay model. Its customers don’t pay anything for getting their credit score analysed and to be informed of their credit health. If credit-challenged customers want assistance to improve their score, they pay ₹750, down from the ₹9,000 that was once charged. The venture charges lenders depending on what the service is. It can vary from 0.3 per cent on a housing loan where CreditMantri has evaluated the customer, to 1.5 per cent on a personal loan.
There is another revenue stream too. Banks and other lenders refer customers for evaluation to CreditMantri. In these cases, the company gets a payment irrespective of whether the customer gets the loan or not. “It’s a very small value, we are hoping the volume on that will be high,” says Punja.
He points out that banks are constantly looking at ways to reduce cost in loan acquisition. The cost is really in the data and the verification. Today, data are available and verification can be done, he adds. He expects a lot more traction in that space, where banks outsource their data verification to CreditMantri.
According to Punja, data can be accessed from various sources — the customer’s bank statement, mobilephone records, e-commerce transactions and payment of utility bills — to build a profile of the customer. The firm can also use other information — such as the location of his/her residence, the profile of their employer, their current designation — and put all these together to build a profile, to be provided to the lenders. The data are accessed with the customers’ consent, he assures.
“Our target customer is anyone with or without a score and who is digitally enabled,” says Punja, and adds that CreditMantri will also have the assisted model, where customers can call in and get clarifications or information.
The next step
With the second round of funding, CreditMantri will also build its customer base through various alliances. It will develop a mobile app that will enable access to mobilephone messages of customers, who being digitally connected to their banks, will receive SMS from their banks for each transaction.
The biggest opportunity for growth, Punja says, will come from the large segment of credit-challenged customers.
But cannot their model be replicated by others? It can be, he says, but adds: “That is why we are consciously trying to build a lot of moats around this business. That is why we are the most inclusive. Nobody offers an end-to-end, fully digital service, across all three segments of customers.”
According to him, CreditMantri is still in a cash-burn phase and hopes to turn cash-flow positive in 24 months.