Shilpa Bhatter, Chief Financial Officer, Dvara KGFS: To facilitate growth, we will foster originating partnerships to achieve an On Book: Off Book Assets Under Management (AUM) Ratio of 70:30, ensuring a balanced and sustainable business model
Mehul Dani
Mumbai, March 9, 2024: Dvara KGFS works with a mission to maximize the financial well-being of every individual and every enterprise by providing complete access to financial services in remote rural India. Dvara KGFS, a rural fintech, has a strong presence in Tamil Nadu, Uttarakhand, Karnataka, Chhattisgarh, Jharkhand, and Odisha, spread across 48 Districts with 308 branches and more than 1.1 million enrolled customers. Ms. Shilpa Bhatter, Chief Financial Officer, Dvara KGFS, talks about its business growth and customer engagement in the current FY, in an exclusive interview with FINTECH BIZNEWS website.
Mehul Dani: What is the y/y growth in the business of your company as of Q3, 2023-24? What are the factors that led to the growth?
Shilpa Bhatter: As of Q3 FY 24, the AUM of the company grew by 33.8% year-on-year. The significant growth achieved by our company was driven by various strategic initiatives and focused efforts. One key factor was the completion of an inorganic acquisition of the business infrastructure of Saija Finance Pvt Limited, effective from January 1, 2023. This acquisition expanded our geographical presence, providing access to new markets in states like Bihar, Uttar Pradesh, Punjab, Haryana, and deeper into Jharkhand, with a total of 101 new branches. The increased footprint played a crucial role in the growth of our Assets Under Management (AUM). Additionally, we placed a strong emphasis on enhancing our Enterprise Loans segment, which experienced substantial growth year-on-year. We also prioritized providing renewal loans to existing eligible customers, ensuring we remained their preferred lender and continued to serve their financial needs effectively.
In terms of customer engagement, we implemented an omnichannel customer management strategy in FY 21-22. This involved establishing digital touchpoints through the appointment of agents across villages, satellite branches, a Direct Customer Calling Center, and a WhatsApp Chatbot. This multi-channel approach contributed significantly to customer acquisition and retention. To improve operational efficiency, we focused on enhancing the productivity of our Wealth Managers through targeted sales and customer management training interventions. This led to an increase in the carrying capacity of our Wealth Managers, enabling them to serve more customers effectively.
Furthermore, maintaining a healthy cash reserve throughout the year was crucial to ensure that our business growth remained unhindered. We also made strategic decisions to reduce our dependency on NBFC borrowing, which decreased from 56% in FY 23 to 38% in Q3FY24. We also increased our engagement with foreign lenders to 18% in Q3FY24, while banking exposure rose to 35% in the same period. These measures helped us reduce our overall incremental cost of borrowing to 12.70% from 14.17% in the previous year.
How has product innovation led to an increase in business? How do new products & services, introduced by your company in the current FY, differ in features, processes, and TAT with those running earlier?
Shilpa Bhatter: Product innovation is at the core of our business operations. It forms an integral part of the customer-centricity and growth engine that drives our profitability.
In that pursuit, product innovation focuses on improving efficiency in customer experience. Given the rural footprint of our high human touch business model, digitalization of customer experience leveraging JAM (Jan Dhan, Aadhaar, Mobile) trinity or Digital Public Infrastructure, as it is more commonly known now, is driving efficiency. Whether it is the use of technology for reducing TAT of loan disbursal or using in-house developed BRE (business rule engines) for quick decisions, Dvara KGFS is constantly upgrading its tech stack to deliver a delightful customer experience. We are part of a venture studio that has access to an entire ecosystem of driving innovation. Despite the legacy systems, our team works towards adopting newer technologies and a Generative AI-based chatbot is the latest in the line of rollouts.
Product innovation has also helped us in touching the lives of our customers beyond credit needs. One of the key innovations has been the introduction of a digital agent-enabled system for selling PAI directly, integrated online with the insurer. This has not only streamlined the sales process but has also resulted in revenue growth and improved value addition for our customers. Additionally, products like Hospicash and EMI Protect have been enabled through this system, offering customers more comprehensive coverage and convenience. Digitalization is an important aspect of our growth story. Saving time for our customers by enabling them to pay online seamlessly using NACH or UPI has significantly improved the efficiency of our collection processes and reduced manual intervention, leading to faster and more secure transactions. Another innovation has been the digital fulfilment of pre-approved loans, launched towards the end of Q2 and early Q3. This initiative has not only improved operational efficiency but has also enhanced productivity by reducing the time taken to process loan applications.
Overall, these product innovations have not only expanded our product portfolio but have also improved customer experience, efficiency, and overall business performance.
What are your targets and plans for business growth in the current FY?
Shilpa Bhatter: In the current fiscal year, the company aims to achieve a business growth rate of approximately 25% year-on-year, targeting Assets Under Management (AUM) of around INR 2300 crores by the end of the fiscal year.
What is the strategy for business growth in the next FY?
In the next fiscal year, our strategy for business growth includes leveraging the newly acquired Saija branch network and expanding our geographical presence in key potential markets and white spaces. This expansion will involve opening 50 new branches and implementing an Extended Branch Model in 35 locations. Additionally, we plan to enter the states of Andhra Pradesh and Telangana to further broaden our reach. To enhance our offerings, we aim to establish an exclusive Enterprise Loan Vertical supported by an advanced digital credit underwriting tool. We will also increase our focus on the Secured Enterprise Loan product to cater to diverse customer needs and preferences.
Customer retention is a priority, with a targeted renewal rate of over 60% and a graduation rate from Joint Liability Groups (JLG) to Enterprise Loans (EL) at 40%. We will strengthen our collection efforts by enhancing our collection team and network of collection agencies to reduce Portfolio at Risk (PAR) and increase write-backs.
Geographical diversification is another key aspect of our strategy, aiming to de-concentrate further from Tamil Nadu. We plan to diversify our product portfolio by shifting the JLG: EL mix to 60:40. Furthermore, we aim to diversify our lender portfolio, favouring the banking sector to reduce our overall cost of borrowing.
To facilitate growth, we will foster originating partnerships to achieve an On Book: Off Book Assets Under Management (AUM) Ratio of 70:30, ensuring a balanced and sustainable business model.
