Suryoday has completed a decade of operations, starting as a Micro Finance Institution (MFI) and getting converted into a Small Finance Bank (SFB) in January 2017. The SFB has now set its sights on becoming ‘the Bank’ for its one million MFI customers. R Baskar Babu, MD & CEO, says that the current year will be one of an intense executions in terms of enabling the bank’s existing MFI customers to become full-fledged banking customers. The SFB also plans to roll out education and two-wheeler loans for its existing customers. In an interview with BusinessLine , Baskar shares his thoughts on Suryoday’s journey so far and the road ahead. Excerpts:

How will you sum up your 10-year journey ?

The first 10 years is a small, yet significant milestone in the building up of an institution. If you have to build a financial institution, you have to really think long-term. It is a super-marathon. Growth has to be meaningful. Success has to be understood.

So, in the first 10 years whenever growth and profitability have been very comfortable, we stepped back and asked ourselves the question as to what drives our success.

There is quite a bit of learning. If we realise that the success is substantially driven by the market and we are not comfortable with the heady growth, we will devise our own percentage of growth that we will do.

Another important thing is culture. It has to be built, if i am not exaggerating, right from Day 1. Many a time, there will be testing of that culture — whether you are conservative, prudent, visible.

But if you are reasonably clear that this is the way you want to do things, you will have to stay on course. So, we stayed on course even as we converted into a bank and realised that the best branding for a bank over the long-term will be word of mouth and good customer service. It is not just hoardings, advertising and TV ads that give you visibility. We also learnt that a true good brand is not just telling a story, it is also living the story.

So, in the last 10 years, we wanted to keep a few things straight — to have a good culture and attract only people who will fit into that culture. Be prudent in our growth strategy. Growth comes in always in the market we are in. So, keep growing to an extent where we continue to maintain culture and prudence. The journey so far has been fairly good.

What growth opportunity are you seeing in banking space?

We are too small at this point of time, but the opportunities are huge. Can we become ‘the Bank’ for the customers we have? We have 1.2 million customers. If we can do a fantastic job for the existing customers, we will have closer to 2 million customers by the end of the year.

We are acquiring about 50,000 customers a month. If we do a good job for our customers, becoming the banker of their choice, where they say that “I am banking with them, I know that they will only do me good and I want to transact only with them”, then you know how to acquire more. So, I do not see a challenge in terms of growing, say, 50-60 per cent year after year over the next five years.

We want a steady growth so that we don’t have to stretch ourselves to create stress. We have to be cognisant of the fact that the customer requirement/ profile is continuously evolving and trying to design any product based on historical knowledge of the customer will not necessarily be the right thing.

How was FY19 for your bank?

We had a 75 per cent growth in loans in FY19 and close to 100 per cent growth in terms of deposits. The net profit moved up from ₹10 crore (in FY18 the bank had to provide quite a bit towards loan losses) to ₹88 crore in FY19. We had a very good financial year across all parameters.

So, we are not under any pressure now in terms of costs. This enables us to invest in what is really now required for the next level — technology, people and branding (below the line activity, word of mouth). Our customers are our brand ambassadors in terms of referring more customers. So, targeted deposits are coming in. This year we will be focussing more in terms of deposits from our MFI customer base. We will double our deposits from ₹1,700 crore.

We will have a 50-60 per cent growth in our asset base, which stood at ₹3,000 crore. Our unsecured (MFI) loan portfolio is around 80 per cent and the balance is retail assets. It is likely that this ratio will change to 70:30 in FY20.

Unsecured loans will not be more than 50 per cent of the portfolio in the next five years. And this does not mean that we are slowing down on micro finance. We will continue to grow. But the other piece (non-MF) business will grow faster, considering that we have a low base.

What are your IPO plans?

We will also have to get prepared for listing next financial year. The criteria for listing is three years from the time our net worth becomes ₹500 crore. So, our tier-I net worth, as computed for RBI purposes, became ₹500 crore in FY18.

So, by March-end 2021, we will have to mandatorily list. Our intent is to list at least a couple of quarters ahead — somewhere between September and December 2020. The promoters (R Baskar Babu, P Surendra Pai, PS Jagdish and GV Alankara) will continue to hold 26 per cent minimum, as required by the regulations. We (promoters) hold 26.9 per cent stake.

The minimum threshold that we will have to maintain is 26 per cent for five years from the date of commencement of operations till 2022. And 20 per cent of the post-issuance we will have to hold for three years from the date of listing, as required by SEBI regulations.

Some of the institutional investors may offer shares in the issuance and public will hold at least 20 per cent. The issuance will be a mix of offer for sale and fresh issue of shares.

We may raise ₹500-₹800 crore ballpark via IPO. Of this, around ₹300-400 crore will come into the bank via fresh issuance. Most investors want to stay invested for long-term.

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