Godrej Capital, the financial services arm of Godrej Industries Group, will launch unsecured commercial loan products for small and medium-sized enterprises (SMEs), a senior company official said.
“During the January quarter (2023), we will launch commercial unsecured loans to small businesses based on their cash flow. We will start with supply chain finance and business installment loans and go full throttle from April,” said Manish Shah, MD and CEO, Godrej Capital.
Godrej Capital is the holding entity of Godrej Housing Finance, a housing finance company and Godrej Finance Ltd, a non-banking finance company, which offers property based loans (LAP) to individuals and small businesses. The average note size for home loans is ₹50 lakh while the LAP note size is around ₹1 crore.
Highlighting the opportunities available in unsecured loans, Shah said India’s consumer credit market is around ₹32,000,000, of which ₹22-23,000,000 is spread across mortgages while over 10,000 ₹000 is spread over unsecured loans. loans, including credit card loans.
Godrej Capital’s unsecured business loans will focus on SMEs including retail businesses, traders, manufacturers and service providers with a turnover of ₹1-50 crore.
Real estate loans & LAP
In November 2020, Godrej Capital started in four cities of Mumbai, Delhi, Bangalore and Pune with housing loans (under Godrej Housing Finance). It later expanded to seven other cities including Chennai, Ahmedabad, Surat, Hyderabad, Jaipur, Chandigarh and Indore with LAP products (under Godrej Finance). Shah said while the 11 cities will see the launch of unsecured business loans from January, he will only introduce housing loans in the seven new cities after stabilizing the business loan segment.
“Although they arrived late, there are quite a few opportunities for players capable of designing products specific to SMEs. For example, we have launched products that give borrowers the option to pay interest only and then increase, start with higher amounts, manage payments based on monthly cash flow, partial repayment of loans, loans with repayment over 25 years, etc. Shah added.
He said the Chennai market alone has a monthly run rate of around ₹1,500 crore in LAP for small businesses and Godrej Capital aims to capture 10% market share in the segment over the next 18 coming months.