The potential of India story is tremendous

Home Credit India, the Indian subsidiary of the Netherlands-based, over Euro 1,619-million (Rs 12,126 crore) consumer finance provider Home Credit BV, sees India as a key growth market as it looks to enable the upwardly-mobile to progress confidently by taking care of their funding requirements.

Having gained a stronghold in North India from where it commenced its operations in 2012, the company has now set its sights on the West and South zones to expand. In an interview to The Hans India, Home Credit India’s Chief Executive Officer Pavel Maco shares the company’s take on the Indian consumer finance market, expansion plans and growth trajectory. Edited excerpts:

What is your core marketing strategy for a developing country like India, and the potential it offers?
India, compared to other HC (Hague Convention) countries, is still in its investment phase. It is a key growth market for the Home Credit Group. Till now, the Group has invested in expanding the India business and will continue to support this growth. With a population of over a billion that is largely financially-underserved, we believe the potential of the India story is tremendous.

In how many cities does Home Credit India has its presence currently, and what is your long-term vision for the Indian market?
Currently, Home Credit operates in nearly 50 cities across 14 states across the country. We have a network of nearly 4,000 points-of-sale (PoS) where we service over 800,000 customers through a driven employee base of over 10,000. Of these, 500,000 customers were acquired only in 2015.

By the end of 2016, we aim to have a network of 7,000 POS and our target for 2016 itself is to hit the one million-loan mark. This is the same amount that we have done in India in the last four years cumulatively. In terms of business, we have disbursed loans of approximately Rs 700 crore in the last calendar year.

During January-March 2016, we already disbursed loans of Rs 250 crore, which is 3X more than what we achieved in the same period of 2015. This will form a strong base for our cross-selling business in the coming years. We thus predict that 2017 is going to be a really big and promising year for us.

Which are your key growth markets in India, and where do the two Telugu states – Telangana and Andhra Pradesh – stand in your overall India business?
We had launched first in North India – Delhi National Capital Region and Punjab – and hence these markets are the biggest contributors to our current business. Going ahead, we are going to strengthen our presence in the West and South zones as well. We have had entered Telangana and Andhra Pradesh just recently and we operate in two cities, Hyderabad and Visakhapatnam.

Therefore, their monthly contribution is relatively small and stands at around four per cent. However, the last numbers shows that their grow dynamics are almost doubled compare to the NCR.

There are other established consumer durable and two-wheeler lending firms like Bajaj Finserv in India. What are the differentiating factors that keep Home Credit India stay ahead of competition?
No organisation operates in a market without competition. Having said that, we operate in a space that not many NBFCs (non-banking finance companies) have entered till now. Over 70 per cent of our current customer base is first-time loan takers (CIBIL -1), and the average ticket size of the loan being approximately Rs 10,000.

Any inorganic growth plans on the cards?
Until now, we have focused on organic growth. In the future, however, we look at this route with progressive fintech firms.

Have you lined up any new products, specifically for the Indian market?
The Home Credit Group operates globally either as an NBFC or a bank, depending on the company’s strategy for the country and the local regulations. In India, we operate as an NBFC. In principle, products do not differ that much (loans for consumer goods purchases; personal cash loans; deposits where applicable) but obviously they are localised to reflect the local demand, customer behaviour and preferences, costs of funds and citizens’ risk profiles.

How do you justify your variable and high interest rates when you are talking about financial inclusion? Do you feel that your current small ticket size in India is one of the reasons for high interest rates?
Home Credit offers competitive, risk-based interest rate that varies basis customer profile and credit history. Interest rate is in principle a function of a customer’s risk profile. This is a predominant component of the overall price. Financial inclusion is about an access for those who deserve to grow and who have been refused by high-street banks, mainly because they do have neither credit history nor collateral.

So far, they have been left behind a regulated financial landscape, for loan sharks. We are bringing them on board through small loan tickets and give them a chance to advance their lives, including building up their own credit history. In many cities, you will see our customers being offered as low as zero per cent interest rates.

Having said that, one must remember that a customer with a stronger credit history presents a lower risk profile and hence could receive a more favorable interest rate on his/ her loan. Our aim is to help a large majority of our customers build and strengthen their credit scores so that as they build their credit history, they will benefit in the long-run.