Exclusive: Godrej Capital eyes Rs 6,000 crore MSME loan book by end of FY24, says MD and CEO

Currently, the company has an AUM of Rs 5,300 crore, out of which over Rs 2,000 crore is under MSME, Manish Shah told Moneycontrol.

Godrej Capital, the financial services arm of the Godrej Group, aims to treble its micro, small and medium enterprises (MSME) loan book to Rs 6,000 crore by the end of the current fiscal, said Manish Shah, MD and CEO.
At the end of March 2023, the company had a total loan book of Rs 5,300 crore, out of which Rs 2,000 crore was under MSME.

“We aim to have total assets under management (AUM) of Rs 12,000 crore by the end of FY24. We are aiming for Rs 6,000 crore under MSME lending, which would be 50 percent of our total loan book,” said Shah.

Many non-banking financial companies (NBFC), or shadow banks, are turning more aggressive in funding MSMEs.

An Avendus Capital report on MSME lending said there exists a credit gap of $530 billion in the MSME sector. “India has over 64 million MSMEs but only 14 percent have access to credit,” said the report.

On the untapped demand for MSMEs, Shah said there is a significant credit demand from MSMEs and Godrej aims to work on meeting that demand.

“It is estimated at $230 billion, and we see a lot of scope to serve this market with the trust of the Godrej brand and product innovations, which enable the MSMEs to grow their business,” said Shah.

Partnerships and challenges

Many NBFCs have partnerships in place with banks to tap the credit-hungry market of MSMEs. Other than that, banks, including major public and private ones, have introduced customised platforms and services for MSME customers.

Public sector lender Canara Bank, for instance, provides contactless loans and other credit services to MSMEs.

Also read: Growth-hungry NBFCs want a bigger share of MSME loan market

Among private sector lenders, ICICI Bank, in May 2022, started a dedicated digital platform for MSME borrowers. This platform could help secure easy credit and other timely loan services. South Indian Bank provides instant approval for a Rs 1 crore loan to MSME borrowers.

Here, Shah highlighted that Godrej Capital’s focus is to build its balance sheet organically. “As of now we are not considering any strategic partnerships with the banks,” said Shah.

Other than this, the use of information technology (IT) and artificial intelligence (AI) in assisting MSME borrowers has witnessed a huge demand and created the possibility of making an impact on the MSME portfolios of banks and NBFCs.

Nirmaan platform

Shah said that Godrej Capital’s new MSME-dedicated platform Nirmaan will help lend flexible credit to MSMEs at favourable terms. Nirmaan will help MSMEs, said Shah, with an all-inclusive opportunity to grow their businesses to their potential.

“We have partnered with Amazon Global Selling, Zolvit, and MSMEx to help with some of the challenges that firms face. These challenges include a lack of skilled workforce, struggles with marketing prohibiting business growth and reach, compliance with government regulations due to a lack of resources and know-how, and many more. We aim to address these through Nirmaan,” said Shah.

Also read: Tight regulations, rising cost of funds can pose challenges to NBFCs, say experts