The NBFC Crisis Didn’t Affect Us: Home Credit

Investors were reactive in pulling out money as they thought the whole industry is going through a bad time, but in reality it is specific to each player, says Marko Carevic, CMO of Home Credit.

Q. How do you see the NBFC crisis? How has it impacted your business? 
Retail NBFCs didn’t have any problems. Though there was shortage of liquidity to NBFCs during this period, it didn’t affect us. We are backed by the PPF Group. Most of the investors are realizing that it’s case by case NBFC liquidity crunch. But it will be over in the second half of this year. A couple of things have caught our attention. First, the majority of growth has not been in the macros. More or less the macros are still growing but they are growing significantly slower as compared to the tier two & tier three cities, and that’s where majority players are looking for growth. Second is the trend that is being seen in digitization and e-commerce. What we see as a dominant trend is that people are getting influenced to buy online. Although people not necessarily end up shopping online, they do get influenced to a large extent. We believe there’s a positive sentiment about consumer durable financing. 

Q. How has the growth been?
Home Credit is the biggest unknown brand in India. It is one of the biggest financers worldwide, currently present in 10 markets with unique offerings in all the markets. It has 4,30,000 point of sales worldwide, more than 15000 employees in India alone with more than 29000 point of sales in India. Size of the business as of quarter ended September 2018 is Rs 6,000 crore. We are currently present in 22 states and 179 cities. Exploring new product lines and cracking the digital to physical value chain which is digitally influenced but physically purchased. Home Credit is the absolute leader in consumer financebelow Rs 10,000. Since operations began 7 years back, the consumer base has grown by two to three times and is soon expected to hit 9 million customers. More than half of our base is actually people who have no credit history or CIBIL score or any credit bureau. We as home credit are focused on this segment. Half of the sales are from non-score customers.

Q. How do you evaluate customers ?
Strong underwriting capabilities with alternative data sources help us in evaluating the customers. Risk management is our centre of excellence. At Home Credit we deploy highly advanced algorithms to determine the credit worthiness of the first time borrowers. The profiling is built through amalgamation of behavioral and factual data available to us after customer’s consent. 

Q. How did the Aadhar Judgement impact your business? 
Aadhar had impacted our online business. For a short period of time we had to put on hold our customer acquisition and but were collecting the requests. And once the new system was in place we started processing those requests. We are assuming and hoping that very soon we wish to see a liberal approach. Currently everything is done online but we still need to do last mile physical signature which is not a pleasant experience for the customers. 

Q. What new products are you exploring?
Smartphones are still in primary focus for Home Credit as we have started offering credit for home appliances. We are seeing vertical and horizontal growth. For horizontal growth, we are enriching primary commodities service, more focus on the retention type of products and how to simplify purchases for customers. When I speak for vertical growth, we are focusing on digital. In global markets, maturity of Home Credit is by company life cycle. When we enter new markets, we try to conquer and tap a particular segment of customers. We expand only when we realize we are good to expand. 

Q. How do you see the competition in the consumer finance?
Our unique offering is we are serving non-score clients. If you compare CIBIL or CRIF reports you will see segments under 10000 & 15000, where Home Credit is on the top. We seek only two documents from client identity proof and address proof. When I visit our POS centers, people recognize Home Credit. Our customers are happy as we are treating them with respect and don’t make them feel unpleasant and unwanted with documentation load as compared to banks. We have 30,000 point of sale network, second after Bajaj Finserv. Banking on the value chain created by our smartphone business, we are entering into credit for home appliances. Increase in purchasing power of consumer durables is not led by discounts or marketing but by affordability. 

Q. What is the default rate?
Not having a credit history and giving an opportunity to people to buy what they aspire. In other words I can tell you that defaults are very less as compared to banks. People tend to mistake credit history with a bad credit history but it’s not like that. If I enable you to buy a first TV or first smartphone they tend to follow up. Many of our clients are repetitive. Customers are aware of the cons of not repaying on time as it hampers their credit history. Our Net NPA is 1.20 as of March ’18.

Q. What are your short-term plans?
As of now we are dominant in North India, but soon aspire to expand in other regions. India, for us, is a strategic market because although we are very big as a group and I don’t like being compared to China. We are already very big in Russia and China but more or less saturated. The next growth opportunity for the group is India. 

Original Source: ET BFSI