Only 10 big players will survive fintech consolidation wave: Lendingkart CEO

Lendingkart Technologies Pvt. Ltd, the technology and digital marketing arm of Ahmedabad- and Bengaluru-based fintech startup Lendingkart group, raised $87 million (Rs 565 crore) in a Series C round last week. It was pegged as the single-largest infusion into a standalone Indian online lending entity.

Infusions of this sort are usually followed up by ambitious financial goals and Lendingkart group, which houses Lendingkart Technologies and non-banking financial company Lendingkart Finance Ltd, is no exception to the rule.

In an interaction with TechCircle, Harshvardhan Lunia, co-founder and chief executive at Lendingkart group, spoke about his company's road map and expansion plans. 

The group, which has customers even in the north-east and Jammu & Kashmir, hopes to double or nearly triple its loan disbursal rates over the next two to three years. Lunia also says that, in all probability, the group would break even and deliver profits in 2018-19.

Lunia also discussed the dynamics of the Indian fintech space going ahead and what lies in store for the sector. 

Edited excerpts:

In 2017, you said your funding requirements had been taken care of for the next four to five years. However, you have gone on to raise two more rounds since. What changed in between?

Early last year, we were thinking of foraying into co-lending and building loan books for others. Somewhere along the line, we realised we want to build our own books.

Based on investor advice and internal discussions, we realised that we want to enhance our data analytics capabilities and build our own books. While we do not actually need funds for running the other aspects of our business, these funds will primarily go into building a solid loan book. 

Also, fundraising is a phenomenon where the intent to raise money should also be matched by investor interest. So when we did that, we received a hearty welcome from investors.

What are your latest growth figures?

We have disbursed 20,000 loans across 960 cities, a 3x growth in terms of the number of cities since March-April 2017. We have evaluated more than 100,000 applications, translating into Rs 5,000 crore worth of business. 

As a data platform that uses technologies like ML (machine learning) and AI (artificial intelligence), it is very imperative that we gather and build as clean a consumer database as possible. We have more than 150-200 million consumer data points based on their loan application and repayment pattern. That data is increasing massively and proving a great differentiator amid our competitors and peers.

There were plans to extend your tech platform to offer SaaS (software as a service) to other players. Has the time come for that?

Earlier, we did have some plans on those lines. However, things have changed now and the current thought is to use it for growing our business, as it has worked out extremely well so far.

Maybe, three or four years down the lane, we may revisit that once again.

When do you expect to turn profitable?

At our current rate and scale of growth, I believe we should hit profitability in 2018-19.

The Indian fintech space is teeming with online lenders. How big is the market? How many Lendingkarts can it hold?

Currently, the Indian online lending space has probably around 200-300 small players. Eventually, the space could become big enough for only around 50-60 players of our size to survive. By our size, I mean players who can generate around $200-300 million worth of business in a year.

The financial services and lending spaces are not the same as e-commerce and hyper-local spaces where the market leaders can just be a handful of players.

However, the limited pool of VC (venture capital) funding and investments available in the ecosystem are likely to bring about an imminent consolidation wave, with about close to 10 large players expected to emerge at the end of the consolidation wave. However, it will easily take another three to four years for this to happen.

What exactly do you mean when you say 'close to 10 large players'?

From our perspective, during investor discussions, we hope to attain a size where we are able to build a loan book worth $5 billion (Rs 32,273 crore) at the end of the next five to six years.

Just to give a comparison, HDFC Bank disburses Rs 5,000 crore ($775 million) a month just in personal and business loans, which already translates into a Rs 60,000 crore loan book ($9.24 billion). 

When we reach our target at the end of the projected time frame, we would still be a small fraction of what HDFC Bank would be offering at that time and this is just one of their business segments, mind you. That is the size and scale I am talking about.

To read the full interview, click here.