GuruFocus -
- Portfolio Quality: 94% of customers have credit scores of 650-plus.
- Gross Non-Performing Assets (GNPA): Currently at 0.7%, below the internal target of 2%.
- Average Loan Tenure: 6.5 months, expected to increase to 12 months.
- Average Ticket Size: INR 44,000, expected to increase to closer to INR 100,000.
- Fundraising: Raised INR 66 crores, surpassing the initial goal of INR 50 crores.
- Team Size: 28 to 30 employees, with plans to hire more.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Apollo Finvest (India) Ltd (BOM:512437) has maintained a conservative approach to digital lending, focusing on high-quality customers with 94% of their portfolio having credit scores of 650-plus.
- The company has successfully raised INR 66 crores, surpassing their initial target of INR 50 crores, indicating strong financial backing and confidence from lenders.
- Apollo Finvest has developed an AI tool called 'Senti' to enhance compliance and customer service by analyzing sentiment in call recordings, showcasing innovation in technology.
- The company has moved into a new office space, reflecting growth and providing a better environment for employees and investors.
- Apollo Finvest's average tenure and ticket size are expected to double in the coming quarters, indicating a strategic shift towards larger and longer-term loans.
- The company's average lending rate of 33% is considered high, which could attract subprime customers and pose long-term sustainability challenges.
- There is a concern about overleveraging borrowers, as highlighted by regulatory actions against other NBFCs in the industry.
- Apollo Finvest faces competition from banks offering lower interest rates to prime customers, which could limit their market share in the digital lending space.
- The company's growth strategy is cautious, which may limit rapid expansion compared to more aggressive competitors.
- There is a reliance on maintaining low GNPA (Gross Non-Performing Assets) numbers, which could be challenging as the company scales its operations.
A: Mikhil Innani, CEO, explained that the strategy is to eventually co-lend with partners after establishing a fruitful portfolio. Some partners are already live with co-lending. Revenue from co-lending can be higher due to API usage and ROI, potentially charging 17-18% on capital provided.
Q: What are Apollo's plans for fundraising and capital deployment?
A: Mikhil Innani stated that Apollo has received sanction letters for approximately INR 66 crores, exceeding their initial goal of INR 50 crores. The focus is on deploying this capital to increase AUM, with expectations for continued growth in the coming quarters.
Q: How does Apollo plan to cater to non-prime customers in the digital lending space?
A: Mikhil Innani emphasized the importance of targeting specific niches and developing use-case-focused lending models. He suggested creating apps or websites that solve specific problems for customers, allowing for lending based on specific use cases rather than competing directly with banks.
Q: Why is Apollo's average lending rate 33%, and how do they manage the risk of attracting subprime customers?
A: Mikhil Innani acknowledged the high rate but noted it is lower than industry averages, which can reach 60-70%. Apollo focuses on serving customers not catered to by traditional banks and uses a data-driven approach to maintain low GNPA numbers by selecting only the top 10% of books from partners.
Q: What is the nature of the loans Apollo has received sanction letters for, and how does it affect interest rate risk?
A: Mikhil Innani clarified that the loans are fixed-term, typically between 1 to 3 years, and Apollo is comfortable with the NIMs. The company does not borrow under conditions that would cause stress and maintains flexibility to adjust interest rates if necessary.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.