Aiming To Become The NBFC For The Unbanked Sector Of India, Says KaramVeer Dhillion, CEO, Perpetuity Capital

KaramVeer Dhillon, Co-Founder, and CEO, Perpetuity Capital

1. How did you pivot towards financial inclusion with a deep focus on EV/CV financing?

The idea to start Perpetuity Capital and the focus on Commercial Vehicles was due to our family's proximity to the logistics industry. Our family has a logistics company and we saw firsthand the liquidity needs of single owner drivers and small fleet owners. Even after clearing all EMIs, an owner needs a minimum of Rs. 2 to 2.5 lakhs a year to maintain a medium/heavy truck. This cost includes yearly costs such as insurance, road tax, permits and tyre replacement that are above and beyond the regular maintenance of a vehicle. Observing the plight of these stakeholders in the commercial vehicle/ logistics industry, we started Perpetuity Capital. We are still exploring the financing of Electric vehicles and are only looking to finance 4-wheelers and only from established EV manufacturers.

2. What are your views regarding the challenges in EV financing? How are NBFCs playing a role in this segment?

Currently, a handful of NBFCs are providing financing to buy electric vehicles but are charging interest rates ranging from 20%-36% per annum. The reason for the lack of funding is that there are hundreds of manufacturers of electric vehicles in India and most of these manufacturers sell their products under their own brand. Since these are not established brands, EV manufacturers give deep discounts on the listed MRP. NBFCs are having a difficult time gauging the collateral value of these vehicles. Moreover, since electric two-wheelers and three-wheelers (L3 segment) continue to drive EV volumes in India, most of the buyers are from the informal sector. These buyers are mainly first-time buyers who have little or no credit history so it is difficult to understand the financial credibility of the borrower. Consequently, upon default, the repossession and legal cost can outweigh the resale value of the underlying asset considering two-wheelers and three-wheelers make up over 90% of the EV sales in India.

3. How are you planning to become the NBFC for the unbanked/informal sector of the country?

Half of India's 501 million workforces is self-employed, which is largely the market that Perpetuity Capital aims to target. Perpetuity Capital aspires to be the NBFC that the unbanked can look to for support to help them achieve their financial goals. We offer loans at reasonable rates with flexible repayment options; this is possible as all our loans are collateralized. We work on a hybrid model as compared to the incumbent NBFCs who run a predominantly offline and broker driven model. Perpetuity Capital uses a combination of offline and online to source loans and we go well beyond the traditional data points (IT returns, banking footprint) when underwriting credit to understand the borrower's ability to service debt. Integrated APIs allow us to instantly verify documents of the borrower and process loans within 48 hours.

4. Are you looking at co-lending with banks?

At the moment we do not co-lend with banks. However, we are actively looking to tie up with banks with a similar ethos to us. We feel with the right lending partner we can cut the red tape that generally plagues public banks and larger financial institutions. Currently, we lend from our balance sheet which shows that we are ready to back our underwriting process with our own capital. Co-lending with banks will give our customers access to even cheaper capital.

5. What is the prime focus for Perpetuity Capital in the next fiscal year? Explain how PC is going to expand further in the country.

Perpetuity Capital aspires to become a one-stop-shop for vehicle financing in India and eventually collateralized financing in India. We are launching our mobile app next month, which is currently in the Beta testing stage. The mobile app will help us blitz scale as we look at co-lending banking partners. Every day we are looking to fine-tune our underwriting process by looking at unconventional data points like PAYTM transactions, petrol card history, and FASTag routes amongst others to verify the credibility of a CV borrower. We are looking to raise venture capital to further grow our loan book to Rs. 50 Cr in this financial year. Moreover, as we rely on a hybrid model where a certain amount of physical interaction is still required, we will open branches in places from where we get the most traction. This will allow us to be nimble and mould our strategy based on the demand in various markets.