Due to the impact of the pandemic and the ongoing moratorium on payments, the digital lending start-ups may undergo a wave of consolidation with the smaller digital lenders and Non-Banking Financial Companies (NBFCs). While looking from the larger start-ups point of view, they consider it as a valuable opportunity and the smaller ones find it difficult to procure capital from their partner NBFCs, as uncertainty on the extension of the moratorium grows.
Experts from the industries and analysts from these areas point outs that the supply for the capital will continue as a challenge for the next 3-4 quarters because the banks and larger traditional NBFCs are expected to become more and more conservative in giving capital to digital lenders. The smaller lenders which means those who disburse loans worth of Rs. 50 crore each month in segments like blue-collared workers, micro-financing as well as short-term (1-3) months credit to look at their stress sale of the loan books and the overall operations. The PayU India’s digital lending arm PayU credit is focusing to acquire smaller digital lending NBFCs and, also they continue to show their differentiated distributions or collection capabilities in areas like car financing and education, which would otherwise take six months to a year to build.
Mr. Prashanth Ranganathan, the CEO of PayU Finance and also the co-founder of PaySense (which was acquired by PayU in January 2020) said that “NBFCs can raise debt corresponding to how deeply they are capitalized. In the case of short-term lenders, whose books and operations predominantly depend on the collections as they receive and are going to find it difficult during this period. Also, most young fintech lenders are witnessing almost sixty percent of the customers are opting for the moratorium”. A digital consumer credit line provider called MoneyTap is currently vetting acquisition opportunities and, also they are looking to add complementary products for their offerings. By acqui-hiring smaller lenders, which refers to acquiring companies to recruit their workers instead of just products and the services. It is a good opportunity for the larger digital lending NBFCs to acquire small lenders or for some well-capitalized firms to strengthen their technical capabilities through acquiring differentiated market plays and they provide an opportunity to add their talent to their operations. Traditional NBFCs are also having discussions with their small digital lenders to snap up their technological offerings based upon their acqui-hiring perspective. Firms those who have raised substantial capital within the past few months might be looking for acquiring smaller lenders because none of them are profitable and they are looking at adding features to boost the demand to make their business profitable.
