Our cost of funds is the lowest in the industry: Mintifi CEO Anup Agarwal

In a Q&A, Minitifi's co-founder and CEO Anup Agarwal talks about how it has enabled distributors and retailers to increase sales

India has over 60 million small and medium enterprises (SMEs) and one of the biggest challenges for them is finance. Fintech startup Mintifi’s strategy is to unlock supply-chain financing by becoming a part of the corporate-distributor-retailer ecosystem. Anup Agarwal, co-founder and CEO, explains to Shivani Shinde the uniqueness of Minitifi’s business model, how it has enabled distributors and retailers to increase sales, and how it is deploying artificial intelligence and machine learning. Edited excerpts:

Why get into the B2B space rather than B2C, which at the time you started was at its peak?

When we started, there were hardly any startups looking at the B2B finance space. The product fitments available in the market were also very poor. We wanted to solve SMEs’ problems. So, we came up with a buy-now-pay-later solution for B2B, where SMEs can use our credit line to buy inventory from all the principle suppliers. We started with lending but we are now building a full-stack solution for payments for SMEs.

One of the biggest challenges of SME lending is customer acquisition. SMEs are scattered all over the country. They are smaller customers, which makes it more difficult to build a distribution network on a pan-India basis.

Two, data availability is pretty poor, compliance support is low, people do not file GST and income tax records are broken. So, how do you underwrite these customers? Third and most important, if something were to go wrong, how will you recover the money?

We decided to tap into the large corporate ecosystem that has a huge distributor and retailer ecosystem. This also allowed us to answer many challenges. For instance, Berger Paints has about 20,000 distributor-dealers. By working with Berger Paints I get access to their distributor network. What it also does for me is address all the supply chain issues.

More importantly, since I go through Berger Paints, and I provide a line of credit to SMEs, my product acceptance is much higher. The trust factor is established, since Mintifi is part of the Berger umbrella. Finally, access to the Berger Paints network also gives us access to a humongous amount of data on these retailers and distributors that Berger Paints has. 

How difficult was it to get the first brand? And how many brands do you work with?

We have 150 corporate partners, and so far we’ve disbursed Rs3,500 crore of credit. But it’s not been an easy ride. Our first client was Euro Kids, the largest pre-school player and largely run by women entrepreneurs. Now, these talented women do not have a CIBIL history, because a large number of them took credit on the back of their husband’s, or father’s, or in-laws’ credit profile. But when they wanted to expand their business and approached the banks, they would be told that they do not have a credit history.

We gave credit lines to several of them, because we had access to data from Euro Kids on how they have been running their business, cash flow patterns, payments history, etc. But the real momentum to the business came after Covid hit and there was a serious need to support SMEs.

How does your solution work seamlessly with both corporates and SMEs?

Our approach towards lending has been more on underlying cash flows. In comparison, what people typically look at is stability of earnings over the next two to three years.

We’ve built an API layer over our Loan Origination Software and Loan Management Software, which helps us connect directly into the Enterprises’ ERP system -- to the extent allowed by the anchor firm. The API layer is very modular and connects to multiple ERP systems, like Tally, SAP and Quickbooks, including different versions of each.

This API layer acts as a two-way handshake. Enterprises can send us distributor details at the tap of a button, including their transactions with the enterprise and their business details. The enterprise also gets a clear view on credit limits set by Mintifi for each distributor.

Every distributor/SME in the network has a borrower app through which he exercises controls over which invoices raised on him should be discounted/paid through Mintifi credit. The app also gives him visibility on his credit limit, utilisation and options to fund and upload invoices, along with multiple options for repayment.

How have you used artificial intelligence and machine learning in underwriting customers better or tapping into newer markets?

Mintifi helps in onboarding those sets of customers which wouldn’t usually get a SCF product from a bank. For example, distributors clocking anywhere between Rs4 million and Rs4-5 crore won’t be entertained by the bank at all. However, Mintifi, just based on transaction data with the enterprise and CIBIL score, can onboard these customers seamlessly with delinquencies of only 0.6 per cent.

Another instance is the paint industry, which is a network where retailers usually buy directly from the enterprise. Banks won’t touch them due to their unpredictable nature, low order value and seasonality in the business. Since Mintifi is tied up with various paint companies like Berger and Nippon, we have a better view on the business, and through analytics and ERP integration we can very easily onboard these customers -- so much so that we are able to clock some of our largest business in these companies. For example, with Nippon we are doing a monthly business of over Rs20 crore.

How well-funded is Mintifi, and do you have plans to raise more funds?

We’ve raised $60 million in equity and about $80 million in debt. We have about 16 lenders on the balance sheet, like Kotak Mahindra Bank, Sidbi, IndusInd Bank, etc. The most important thing is that for a company of our size, our cost of funds is the lowest in the industry. Even after the interest-rate hike, our average cost of borrowing is sub-10 per cent.

Our business is scaling up well. We will be growing at least by about 300 per cent this year as well. For the FY23 business plan, we are fully funded. In FY24 we will look to raise another round of capital (series D). This year we should be raising about Rs1,000 crore in debt alone.

Corporates/enterprises have spent years creating this ecosystem. Why will they allow a third-party player like Mintifi to be part of it?

One clear benefit for corporates has been the way we have been able to benefit their distribution partners in terms of turnaround time, and ease at which they have got access to working capital from us. More importantly, it’s also the efficiency that we’ve been able to drive for them when they’re running this kind of a programme with us.

For instance, the way we’ve integrated with their systems to ensure that there literally is zero manual effort is appreciated. So, the moment I give a credit line to the distribution partner, that credit line is actually sitting into the ERPs. Two, we have been able to increase the sales of these distribution partners, by at least 10-15 per cent.