Naveen Kukreja, the company’s cofounder and chief executive officer, told ET that the platform has already touched an annualised credit disbursal rate of Rs 15,000 crore.
This comes on the back of PB Fintech reporting significantly lower March quarter net loss of Rs 9 crore compared with Rs 220 crore in the fourth quarter of FY22.
PB Fintech’s operating revenue for the March quarter grew by 61% from a year earlier to Rs 869 crore. Of this, credit-linked revenue (or Paisabazaar’s revenue contribution) was roughly Rs 120 crore for the March quarter.
While announcing its results, PB Fintech had said it was looking to clock a net profit in FY24. To be sure, Paisabazaar turned earnings before interest, taxes, depreciation, and amortization (EBITDA) positive in the December quarter last year and is now gunning for net profits.
Operationally, Paisabazaar’s disbursals have grown 76% year-on-year in FY23, while credit card issuances have scaled 2.8 times for the fiscal that went by.
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The digital lending platform only acts as a distributor of credit for its 65 financial partners and does not take any loan on its books since it doesn’t hold a non-banking finance company (NBFC) licence. It earns a commission from lending partners on loans availed by users.It also earns a one-time fee after issuing partner bank credit cards to users.
Almost 88% of its credit disbursals are unsecured personal loans, while the rest–secured loans—go to salaried and self-employed professionals.
“In 2022, we saw that lenders started returning provisions because Covid-losses were not as much as feared. Also macros of India have held firmer, and that has been flowing into the retail lending growth currently. This, coupled with the digitisation post-Covid, has led to improvement of funnels and enhanced the credit segment which can be reached,” said Kukreja on the growth in credit disbursals and profitability. “Further, the operation expenditure has also fallen with digitisation.”
Kukreja said he expects Paisabazaar’s credit disbursals to grow by 40- 50% in the coming few years. The company looks to exit FY25 with more than Rs 30,000 crore in annual credit disbursals, he added.
The cofounder clarified that the credit distributor has no plans, for now, to lend through its books or apply for a banking (NBFC) licence.
Partnerships & trail income
Now Paisabazaar is focusing on deeper partnerships with banks such as Federal, RBL Bank and four other financial institutions to create deeper revenue and commission linkages.
This is to create trail revenue for the firm, which is accrued over time based on the performance of the customer.
In simplified sense, instead of taking an upfront commission to acquire the customer, Paisabazaar will take a fraction of the fee upfront and will be given a certain share of the loan or credit card interest (as commission), as the customer repays. Paisabazaar will accrue this revenue for the lifetime of the product.
“We started our co-create strategy a year back and noticed that there was a segment of credit customers which our partners had not tapped and were worthy,” Kukreja said. “One of the triggers to build trail revenue was that during Covid (March to May 2020), we saw our revenues go down by almost 90% since we were reliant only on disbursements. And one of our thoughts was how we as a distributor create backup revenues.”
To drive engagement, Paisabazaar is also allowing customers to come back and pay credit card bills on its platform, similar to what fintechs like Cred do.
Kukreja said it operates on an 80% margin for these co-created partnerships, with financial institutions also paying a smaller commission to the credit fintech on cross-selling products to the customer.
In March 2023, trail revenue accounted for almost 12% of the credit distributor’s overall monthly revenue. For FY24, it looks to have almost 15% of its overall annual revenue mix from trail revenue and looks to grow this to more than 30% over the next two to three fiscals.
