Godrej Capital, the financial services arm of Godrej Industries Group, will launch unsecured business loan products for small and mid-size business (SMBs), a senior official of the company said. 

“In the January (2023) quarter, we will launch unsecured business loans to small businesses based on their cash flows. We will start with supply chain financing and business installment loans and go full blown from April,” said Manish Shah, MD & CEO, Godrej Capital. 

Godrej Capital is the holding entity of Godrej Housing Finance, a housing finance company and Godrej Finance Ltd, a non-banking financial company, which offers loan against property (LAP) to individuals and small businesses. The average ticket size of home loans is ₹50 lakh while LAP ticket size is about ₹1 crore. 

Unsecured loans

Highlighting the opportunities available in unsecured lending, Shah said, the Indian consumer finance market is about ₹32-lakh crore, of which ₹22-23-lakh crore is split across mortgage loans while more than ₹10-lakh crore is split across unsecured loans including credit card loans.

Godrej Capital’s unsecured business loans will focus on SMBs including retail businesses, traders , manufacturers and service providers with a turnover ₹1-50 crore.

Home loans & LAP

In November 2020, Godrej Capital started in four cities Mumbai, Delhi, Bengaluru and Pune with home loans (under Godrej Housing Finance). It then expanded to seven more cities including Chennai, Ahmedabad, Surat, Hyderabad, Jaipur, Chandigarh and Indore with LAP products (under Godrej Finance). Shah said while all the 11 cities will see the launch of unsecured business loans from January, it will introduce home loans to the seven new cities only after stabilising the business loan segment.

“Despite being late entrants, there is quite a bit of opportunity for players who are able to design products specific to SMBs. For instance, we launched products, which offers flexibility to borrowers to pay only interest and then scale up, start with higher amounts, manage payouts based on monthly cash flows, part prepayment of loans, loans with 25 years repayment etc,” Shah added. 

He said, the Chennai market alone has the monthly run rate of about ₹1,500 crore in LAP for small businesses and Godrej Capital is aiming to capture 10 per cent market share in the segment over the next 18 months.

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