NeoGrowth raises Rs. 300 Crores in a round led by Leapfrog investments

Having pioneered the Digital lending phenomenon in India, NeoGrowth further boosted its vision of lending to small and medium businesses by raising Rs.300 crores of equity capital. LeapFrog Investments, the largest dedicated equity investor in financial services and healthcare for emerging consumers, led the round, with existing investors Aspada Investment Company and Quona Capital, through Accion Frontier Inclusion Fund also participating.Rs in Hand

NeoGrowth’s unique approach towards lending to retailers is based on analysing and underwriting digital payments data generated from daily sales. This approach revolutionises small business lending, making it possible for merchants who are unable to secure loans from traditional banks, to access much needed finance, a major requirement for the underserved SME market in India.

“India’s digital lending space is experiencing massive growth, providing unprecedented  opportunity for NeoGrowth to apply its pioneering technology approach to enable loans for a rapidly expanding SME merchant segment,” said Piyush Khaitan, Managing Director,
NeoGrowth Credit Pvt. Ltd. NeoGrowth plans to utilize the new capital to grow its loan book, continue to reach deeper into India’slargest cities and to further expand into other urban areas.

Michael Fernandes, Partner at LeapFrog, who led the investment, joins NeoGrowth’s Board of Directors. “India is at an inflexion point as the rise of cashless financial services, harnessing big data, transforms the lives of millions of emerging consumers,” he commented.

With the current wave of digitization in India and the increase in adoption of digital payments, the market for digital lending to SME’s is destined to expand further. “NeoGrowth’s emphasis on analytics-driven underwriting and technology-enabled re-payment are the strategic ingredients that have helped the firm expand its customer base across India,” said Aspada Co-Founder Thomas Hyland.” According to a 2017 survey of NeoGrowth’s customers, 50% did not have access to formal funding prior to their first NeoGrowth loan and 82% stated that their business had benefited financially from being able to access a loan from NeoGrowth.

Ganesh Rengaswamy, Co-Founder and Partner, Quona Capital – which manages the Accion Frontier Inclusion Fund – commented, “Merchants today are seeking smart access to finance in a simple and hassle-free manner. NeoGrowth is pioneering digitization of SME financing, which is one of the best responses to this need.”

NeoGrowth featured in this year’s Top 50 emerging market fintech firms as selected by KPMG and H2 Ventures and also amongst Top 10 Social Impact companies by Forbes. NeoGrowth used Avendus Capital as exclusive financial advisors and Khaitan & Co. (KCO) as the legal counsel during the fundraise process.

 

NeoGrowth’s Donation Drive

NeoGrowth recently partnered with Goonj and participated in their used “Clothes Donation Drive.”

Goonj, is a non-prot organization, founded by Mr. Anshu Gupta, winner of the Ramon Magsaysay Award (2015). Goonj is turning the underutilized material of cities into a resource for rural development. It is about turning the age old tradition of using old material as charity and using it for a regular & dignied living. Starting with 67 clothes in 1999,Goonj now deals with over 3000 tonnes of material every year in 22 states across India.

NeoGrowth teamNeoGrowth contributed to the Rahat initiative of Goonj, by organizing used Clothes Donation Drive across its Mumbai, Delhi, Chennai, Hyderabad, Bangalore, Pune ofces. Donation boxes were placed at the respective ofces and a two week communication program was executed to build awareness for the drive.

 

NeoGrowth employees showed immense enthusiasm for the drive and came out in large numbers to contribute their used clothes for the initiative. Across these six ofces, 9 boxes of clothes were collected and were later handed over personally by NeoGrowth team to the Goonj Ofce.

Goonj team

These clothes will be used by Goonj as part of its Rahat initiative, through which they provide need based immediate relief material to help in rehabilitation of natural/human disaster hit areas across the country.

NeoGrowth’ s quest of catalysing the societal impact is further enhanced by initiatives like these, which reiterate the belief that a positive change can be brought about in society both by the loans that we give to SMEs to help them grow their business and also by partnering and encouraging initiatives like this used Clothes Donation Drive, which help us give back to the society in a humble manner.

NeoGrowth recognized as ‘Top 50 emerging fintech firms’ around the world

KPMG and H2 Ventures released their fourth annual ‘Fintech 100’ report which compiles a list of the year’s best fintech innovators from around the world.

The ‘Fintech 100’ is divided into two sub-lists: (1) the ‘Top 50’ established fintech firms around the globe, which are ranked based on innovation, capital raising activity, size and country; and (2) the ‘Emerging 50’ firms, which are newer companies that are at the forefront of innovative technologies and practices and often pursuing new business models.

NeoGrowth Credit Pvt. Ltd. featured amongst the Top 50 Emerging Fintech Firms around the world.

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The selection of companies in the Fintech 100 was a result of extensive global research and analysis based on data and the core five factors noted below:

1. Total capital raised
2. Rate of capital raising
3. Geographic diversity
4. Sectorial diversity
5. X-factor: degree of product, service and business model innovation (a subjective measure that was applied only with respect to companies appearing on the Emerging list)

Some Key Highlights from the report:-

• The Fintech100 included a broad range of fintech companies from 29 different countries, with Companies from Korea, Mexico and Poland featuring for the first time.
• Within the ‘Emerging 50’, over US$600M has being raised in the last year and just over   US$1B has been raised in total (since founding).
• The number of lending and payments related businesses continues to stand out in this year’s Fintech 100, with 32 and 21 companies respectively.
• Vast majority of companies in the Fintech 100 are using data, analytics and artificial     intelligence to fuel their business models.

These factors further embolden NeoGrowth’s outlook towards digital lending, best described in words by Mr. Piyush Khaitan (PK), Managing Director (NeoGrowth). The digital lending space is bigger than what we imagined…this means a very large market opportunity. NeoGrowth is looking at leading this space in India.”

NeoGrowth has been continuing on its journey of helping SME’s grow their business by providing them business loans at quick turnaround time, guided by strong data and analytical inputs and technology enabled repayment mechanism.

Over last year NeoGrowth expanded its geographical presence to 21 cities across India, thereby bringing the SME’s of these regions closer to gaining financial assistance for achieving their business growth.

(* ‘Fintech 100’ by KPMG & H2Ventures)

Realizing benefits of Digital Payment

 Cashless Cities: Realizing benefits of Digital Payment – A report by VISA & Roubini ThoughtLab

VISA in collaboration with Roubini ThoughLab, a New York based research firm published an intriguing report on Cashless Cities & respective benefits of Digital Payment.The report highlights the fact that, a large proportion of the global population and its economic activity is accounted for by cities, supported by the fact that today, over half of the world population lives in cities and over 80% of global economic activity takes place in cities.

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The report categorizes the cities as per following Stages of Digital maturity:-

Cash CentricDigitally Transforming – Digitally Mature – Digitally Advanced – Digital Leader

Indian cities (Bangalore & Delhi) were found to have moderate adoption readiness for Digital payments whereas (Mumbai) showed low digital payment usage.In recognition of this opportunity, a number of cities globally have introduced smart city initiatives, and are utilizing a wide range of digital technologies to improve the lives of their residents. Smart city initiatives and supporting policies could potentially become critical pathways for governments seeking to foster economic growth, improve safety, attract businesses and provide better services to their citizens.

Digital payments technology is a crucial enabler of smart cities, and could contribute significant benefits to consumers, businesses, governments and economies. Since digital payments are a means to an end, the scale of benefit they bring has not been broadly understood or studied.

The report highlighted the net benefits associated with adopting digital payments and does so at the city-level. The assessment was carried out for 100 cities across 80 countries, segmented by stage of digital maturity, with these cities modeled to an “achievable cashless scenario”.

This scenario is defined as the entire population moving to digital payment usage equal to the top 10% of the users in that city today. The findings provide compelling support for greater adoption of digital payments.

The report estimates that increasing digital payments across the 100 cities could result in total direct net benefits of US$470 billion per year. On average, these net benefits represent slightly over 3% of a city’s current GDP.

Some major findings from the analysis contained in the report include:

Consumers across the 100 cities currently spend an average of 32 hours a year on cash-related payment activities. Greater adoption of digital payments is estimated to reduce this figure to 24 hours a year, saving consumers in the 100 cities an average of over $126 million per year.

Digital payments usage, the report projects that total net benefits to businesses across all 100 cities could amount to over $312 billion per year after transitioning to an achievable level of cashless activity.

The report provides support that cities cannot reach their full potential without also having a robust digital payment system. Digital payments, and the policy and industry measures that support them, mean urban consumers spend less time waiting in banking, transit and retail lines, make fewer trips to expen­sive check-cashing venues, and experience lower overall fees associated with financial transactions. A city’s businesses benefit when going cashless from not just greater labor efficiencies and lower direct costs, but also from increased revenue.

This report further bolsters the importance of adopting Digital Payments and the significant impacts that they will have on the economic & societal growth of countries.

 ( *Source : Cashless Cities by  Roubini ThoughtLab & VISA )

 

NeoGrowth releases its Social Impact Report for FY 2017

NeoGrowth’ s 2017 Social Impact Report explores and reaffirms our core vision of being an enabler in the Small and Medium Enterprise (SME) ecosystem. This year, we explored NeoGrowth’s support to diversity,social inclusion and entrepreneurial support in testing times for business environment. We also continue our review to reaffirm NeoGrowth’ s support for first generation entrepreneurs, financial inclusion, job creation and encouragement to women entrepreneurs.

NeoGrowth evaluated the Social Impact caused by its lending activity by conducting customer surveys and interviews. This activity was done by a third party agency who conducts an independent survey on a random sample basis, chosen by them.

The survey revealed a strong trend of improvement in CIBIL scores of participants,especially for those merchants who were exposed to repeat lending, thereby enhancing their creditworthiness and enabling them to access mainstream finance.

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36% of the merchants reviewed witnessed an improvement in their credit scores thereby enabling them to integrate into the formal banking system with an improved borrower profile.

Though year 2016-17 was very challenging year for SME segments cause of demonetization and other tax legislation, 41% of the merchants assessed had renewed the loans taken from NeoGrowth, a direct indication of their positive outlook for the future.

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NeoGrowth believes in giving wings to entrepreneurs with potential to make their dreams a reality.

 

NeoGrowth expands its fintech Footprint

NeoGrowth continuing on its journey of providing capital to retailers for business growth has opened nine new branches across India. These fully functional & operational branches have brought the ease of getting business finance to the door-steps of retailers at Lucknow, Vijayawada, Surat, Coimbatore, Visakhapatnam, Madurai, Ludhiana, Baroda and Mysore.

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With this NeoGrowth now has a presence in nineteen major cities across India and is a step closer to achieving its objective of enabling small businesses to access finance in a quick and easy manner.

The country is witnessing a surge in Digitization and various day to day activities, right from as basic as paying utility bills to financial transactions involving payments made for inventory purchase, business expansion, renovation etc. are all being made in a matter of minutes using various digital payment mediums. Thus, it is to no surprise that the Indian consumers as well as businesses are adopting themselves more & more towards this digital revolution.
NeoGrowth aims at contributing towards this digital revolution in its own humble and proficient manner, having created a niche in the lending space by helping small and medium sized retailers, restaurants, beauty salons, automobile dealers and fuel stations.

The NeoGrowth loan product is very different from a typical bank loan. NeoGrowth has done away with the necessity of the merchant to visit the lender’s location at any stage. All the stages involved from loan application to disbursement are streamlined and powered by technology & manpower support. This helps in saving crucial time for business owners and provides them with ease and assurance of availing quick finance.
With the addition of these new cities in its operational domain, NeoGrowth business loans are now available to a wider demography of retailers who can now experience the digital growth in its truer sense and benefit from the same.

NeoGrowth at National Garment Fair 2017

The 65th National Garment Fair organized by the Clothing Manufacturers Association of India (CMAI) was held at Bombay Exhibition Center, Mumbai from 10th July to 12th July. This being one of the largest event in India for Garment Industry witnessed over 800 exhibitors comprising of retailers, distributers and suppliers from the garment sector.

img_27_7_17_3NeoGrowth was present at the exhibitor booth and generated an encouraging response for availing the facility of business finance, both from the garment retailers who came as visitors, as well as the exhibitors who were pre-dominantly garment distributors. This 3 day event saw a footfall of more than 20,000 visitors from across India.

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This event helped NeoGrowth in having a close and personal interaction with the retailers and provided an opportunity to brief them about the ease and benefit of availing NeoGrowth loans using which they can boost their business.

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The keen interest in unique features like technology enabled processing, door-step service and minimum documentation of NeoGrowth loan was fuelled by that fact that many of these retailers required quick finance to add new garment stocks at their outlets in order to gear up for the upcoming festive season in India. These enquiries were promptly addressed by the NeoGrowth team present at the event and all assistance for the same was provided to retailers during the event.

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The participation in events like these has helped NeoGrowth in promoting its unique tech & touch model to the retailers and also provides the retailers with an opportunity to grow their business by availing financial assistance from NeoGrowth.

NeoGrowth co-sponsors IMC Conference

The Indian Merchant Chamber (IMC) organized its Banking and Financial Services conference on ‘Catalyzing MSME Entrepreneurship in India’ on 22nd June 2017 at Mumbai, where NeoGrowth was one of the co-sponsors.

This daylong conference focused on key issues being faced by Indian entrepreneurs – Capital, Technology and Policy wherein experts presented their views on these relevant issues.

4_7_17The inaugural speech for the conference was given by Mr. Arjun Ram Meghwal, Union Minister of State for Finance, Government of India. Also present as key invitees of the conference were Mr. Urjit Patel, Governor, Reserve Bank of India (RBI), Mr. Pravin Gordhan, Former Finance Minister, South Africa, Mr. Junaid Ahmad, Country Director (India), World Bank.

 

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KPMG India were the knowledge partners for the conference and released their research paper on SME Financing. The conference was spread over three sessions, each covering a key issue.

Mr. Sanjoy Shome, (COO – NeoGrowth) was a panelist during the session on how the need for Capital can be addressed best for MSME’s. He showered light on how the amalgamation of analytics, technology and Digital mediums is important to build an efficient and robust architecture for MSME financing.

 

4_7_17_3 Mr. P. Ravindra (Specialist – Compliance, internal audit & spcl. projects, NeoGrowth) and Mr. Yogesh Nakhwa, (VP-Operations & Business Excellence, NeoGrowth) were the delegates that represented NeoGrowth at this conference.

The conference highlighted key indicators which will help in the growth of SME sector like policy changes that can help underwrite finance for industry segments that are not completely organized. How factors like data around Inventory management, analysis on spends happening on a merchant’s outlet etc. can be additional tools that can be used to underwrite finance in addition to the traditional methods of bank statements, collaterals etc. The need for resolute adoption of technology and digital mediums to help smoothen the process of financing for MSME’s were a highlight of the conference.

NeoGrowth is already on the path to address and implement these factors with its initiatives like merchant portal, Sales App that will help in quick financing for MSME’s. The adoption of Digital medium to reach out to prospect customers is a step closer towards financing them.

NeoGrowth continues its quest of bringing customer delight in the Fintech domain by working closely with all the stakeholders that can make the life of an end consumer better & making the process of doing business easy for them by addressing the key issues of obtaining finance.

NeoGrowth at Metro – Cash & Carry

img001NeoGrowth initiated a co-branded customer engagement activity at Metro Cash & Carry, Bangalore. Metro Cash & Carry is one of India’s leading business to business wholesaler. It has 23 operational centers in India and presence in Europe, Africa as well as other Asian countries. METRO Cash & Carry India’s core customers include small retailers and kirana stores, hotels, restaurants and caterers, corporates, SMEs, all types of offices, companies and institutions, as well as self-employed professionals.

 

img003NeoGrowth undertook a month long activity at the Yeshwantpur outlet of Metro Cash & Carry. This is the flagship store of Metro and is witness to over 1 lakh footfalls over a month. Basis these facts , NeoGrowth was present in a grand scale at the outlet and had installed an entry arch , cash tills along with a Kiosk manned by NeoGrowth representatives at the store.

 

img002This month long activity helped NeoGrowth in having a one to one interaction with the retailers and provided an opportunity where we briefed them about the unique facility of NeoGrowth loans. The features like automatic repayment & Min. documentation requirement of NeoGrowth loans were a major draw for the visitors and saw the generation of lot of enquiries for business loan. NeoGrowth also funded couple of loan requirements at the store during the course of this activity.

There were many retailers who were new to the concept of a Point of Sale (PoS) machine and showed interest in availing the same, a service which is also addresses by NeoGrowth.

The organization of events like these has helped NeoGrowth in promoting its unique tech & touch model to the retailers and also provides the retailers with an opportunity to grow their business by availing financial assistance from NeoGrowth.

Impact of Demonetisation on Digital Lending Industry


The small and medium enterprise (SME) lending market in India is worth almost $300 billion today and the digital lending segment constitutes 10% of it, approximately $30 billion*. Post-Demonetization in 2017- 2018, Digital lending industry is set to be the growth driver in the SME lending segment, constituting more than 10% of the ever-increasing SME lending market in India.


Demonetisation

The rapid embrace of digital payments followed by the crackdown on cash transactions post demonetisation, is now set to greatly benefit an allied industry: Digital Lending Industry. Digital Payment companies such as PayTM did emerged as the immediate winners post the government’s decision to scrap the high-value banknotes and push for cashless transactions on 9th of November 2016. Then, the Digital lending firms saw a temporary slowdown in borrowings, but industry executives and experts believe that this industry is there to stay and benefit the most. **

Hence, before drawings conclusions on the effects of Demonetisation on the Digital Lending Industry’s, some major reasons contributing to the same are highlighted below:
(A) The total number of card transactions over point-of-sale (POS) saw a whopping increment***

POS

Analysis:
The total number of card transactions at POS saw a whooping monthly growth of 46% in November 2016 and 59% in December 2016. This is majorly because of the monthly 68% increase and 76% increase in number of debit card transaction at POS in November 2016 and December 2016 respectively. Whereas, the number of credit card transactions at POS also saw a nominal monthly increase in 10% and 19% thereon in November 2016 and December 2016 respectively.

The total number of card transactions at POS post demonetisation in the month of March 2017 is 64% higher than the pre demonetisation in the month of October 2016, observing a 104% growth YOY. Similarly, the number of debit card transactions at POS post demonetisation in the month of March 2017 is a whopping 93% higher than the pre demonetisation in the month of October 2016, again observing a 140% growth YOY. Also, the number of credit card transactions at POS post demonetisation in the month of March 2017 is 20% higher than the pre demonetisation in the month of October 2016, observing a 47% growth YOY. The amount of cards transaction follows a very similar trend with a large uptick in the debit card and a nominal uptick in credit card.

Conclusion:
The card transactions at POS machine saw a very encouraging growth, especially for digital lenders who lend against future card transactions at POS.

(B) Digital payments Infrastructure (POS Installation) continues to grow at a steady pace***

point of sale

Analysis:

The installation of POS machine continues to be on rise as per the government mandated installation of 10 lakhs new POS machines by March. An average of 11% rise in the POS machine can be observed.

Effects on the Digital Lending Industry:

1. Reducing risk via massive increase in digital data points: Digital footprints increase as customers are making more purchases through digital wallets or credit and debit cards. This gives rich data points and it will help digital lending players give customised small-ticket loans to individuals or businesses instead of generic ones. This will bring down the risks, especially associated to unsecured loans.

2. Increasing interest on alliances from big banks: Digital Lending firms are seeing increased interest from banks and NBFCs, who are keen on tapping digital data points. For example, IDFC Bank, Yes bank and RBL bank has tied up with other digital lending players. ****

3. Expected higher disbursals post demonetisation: Owing to the higher digital footprint resulted due to increased card transactions at POS and high growth of other digital payments solutions, the digital lending business is set to grow multi fold in India.

“The biggest near-term beneficiary is payments but I think in the next 12-18 months there will be a significant jump in digital lending,” said Bala Srinivasa, partner at venture capital firm Kalaari Capital. ****

4. Big Bet on MCA Business through POS: The card transactions at POS machine saw a very encouraging growth during demonetisation as well as post demonetization (as shown before). Businesses build on loan recovery through POS terminals are to watch out for, as the transaction acumen via POS has received a great boost.

5. Venturing into unchartered territories: Digital Lending firms are partnering with new digital payment solutions like Mobile Wallets, UPI, Aadhar based payments etc, to expand their acceptance ecosystem. These new digital payment solutions are supposedly the future of the payment industry and hence such partnerships are of vital importance.

*Source: Financial Express – “Demonetisation impact” dated January 11, 2017
** Source: TOI- “Digital lending start-ups await their day in the sun” dated December 6, 2016
***Source: RBI Data
**** Source: ET- “Digital lending start-ups feel the heat after demonetisation” dated December 06, 2016