What rising collections and fewer loans under moratorium mean for Capital Float

Bengaluru-based digital lending major Capital Float has seen a sharp fall in loans under moratorium in the last three months and has reported an 87 percent jump in ‘collections’ in June 2020.

The company said that it currently has 34 percent of its entire loan book under moratorium compared to more than 56 percent in the first moratorium offered by the Reserve Bank of India. It has also made the entire collections business in-house, and this is showing results, the founders claimed in a blog post on Tuesday.

Capital Float was founded by Gaurav Hinduja and Sashank Rishyasringa back in 2013. One of the most promising fintech lending players in the SME space, it is backed by large investors such as Ribbit Capital, Amazon, Sequoia Capital and SAIF Partners.

Capital Float hit a rough patch in 2019, when the entire shadow banking sector was affected by the IL&FS saga and certain lines of its businesses saw a massive deterioration in asset quality.

Targeting a turnaround

In early 2020, the founders claimed that the startup was on the path to revival and that they had managed to shut down loss-making businesses such as education loans. Simultaneously they had pushed other businesses such as working capital loans, loans for online purchases and others.

The company said that it has been able to retain Rs 200 crore in cash balances in March, through the first few months of the Covid-19 outbreak. It currently has a capital adequacy ratio of 45 percent and total Assets Under Management of Rs 900 crore.

“We built a more rigorous cash flow forecasting model, optimized asset liability managements, and controlled costs by re-engineering our tech platforms,” the founders said in the post.

The startup has vacated 17 of its 20 offices across the country and enabled long-term work-from-home for employees, thereby cutting costs further.

Collections up

Capital Float’s efforts to strengthen its collection teams and get everything done in-house has led to improved recovery of loans. It ended March 2020 with gross non-performing assets of 2.1 percent. NPAs are loans for which repayments have not been made on time.

While collections fell drastically in March because of Covid, they climbed to 67 percent in April and reached 87 percent in June, said the company. In-house collection teams, with more fluid collaboration from the sales and credit teams, helped push this number.

Cities such as Vishakhapatnam, Nagpur, Rajkot and others lead in collections for the startup.

On the lending side, Capital Float saw massive demand for pay-later options among consumers. The company said that it has financed 8 lakh new borrowers over the last three months and is adding more than 1.5 lakh new consumers every month.

The founders have managed to secure Rs 100 crore in debt for onward lending and a few industrial sectors are looking up with cities slowly beginning to unlock.

Industries such as pharma, grocery, consumer appliances, computers and peripherals are seeing a revival, which translates into better business opportunities for lenders such as Capital Float.