Dhoni-backed Finance Buddha bets on agents amid digital push

Mumbai: Finance Buddha, a bootstrapped financial services platform, is betting on its loan distribution and aggregation model, as well as its agent network, as it raises capital from the public markets.

The initial public offering (IPO) of the 13-year-old fintech, backed by Ashaish Kacholia and Mahendra Singh Dhoni, will be open for subscription till 10 November on Emerge, the National Stock Exchange’s platform for listing of small and medium enterprises (SMEs). The IPO, comprising a fresh issue of shares worth ₹71.68 crore, has been priced at ₹140-142 apiece.

The IPO, which opened for subscription on 6 November, was subscribed over 1.21 times at the end of the second day.

Founded in 2012 by Vivek Bhatia, Parth Pande and Parag Agarwal, the company also counts Shakar V, founder of CAMS and member of investment firm The Chennai Angels, as an investor.

It reported total income of ₹223 crore in FY25 and profit after tax of ₹8.5 crore, with an Ebitda margin of 6.7%, according to its IPO filings. Ebitda is earnings before interest, tax, depreciation and amortization, a measure of operating profitability.

The anchor portion of the IPO was subscribed 1.6 times on 4 November, with the company raising ₹20.4 crore from domestic and foreign investors.

Ashish Kacholia (through Bengal Finance & Investment), the largest existing non-promoter shareholder, was the largest investor, committing ₹7.17 crore. Bandhan Mutual Fund, through Bandhan Small Cap Fund, invested ₹6.17 crore. The two lead investors accounted for two-thirds of the total amount raised, while seven other domestic and foreign investors invested around ₹1 crore each.

Finance Buddha connects borrowers, either through its agents or its digital platform, with lenders and earns a commission on successful loans. The focus is on customers who typically would find it difficult to avail loans from traditional banks and NBFCs.

“Lending rules in financial institutions tend to be very templatized. They are built with certain biases but over a period of time, customer profiles have evolved, job natures have changed,” Pande said, adding that essentially today, the “underwriting template rejects more than it approves”.

Digital push

The company plans to use the IPO proceeds to upgrade its proprietary technology platform, expand its agent network and deepen its presence in emerging markets. The agent business contributes around 85% of its turnover, and the remaining 15% comes from the digital business.

The company expects growth to be driven by rising share of digital business, data monetisation and expanding margins in the digital and agent businesses, according to the company’s management.

“There is a lot of capital which is revolving in the system. But the capex is very limited. So it’s a very asset-light model,” co-founder Pande told Mint. The only capital expense for the company is the gap in the payment cycle, between what the company has to pay its partners and when it receives funds from the lender.

The company has a network of over 2,500 agents, and it supports them by offering supplier credit to explore new geographies, start a new line of business, hire more team members or set up new offices, Pande said. Finance Buddha has tied up with over 150 lenders, of which 100-120 are active.

Currently, 75% of the company’s revenue is from the distribution of personal loans and 20% from small business loans. Pande said that the focus is on reducing the reliance on personal loans but not by slowing growth, but by adding new products such as gold and home loans.

“Personal loan contribution will continue to grow at 25-30% CAGR. It’s just that we want other businesses to grow at a rate which is faster,” he said, adding that the aim is to bring down the share of personal loans to 55-60% over a period of time, and the total share of unsecured loans to 50% in 3-5 years.

Finance Buddha had received the non-banking finance company (NBFC) licence for its wholly owned subsidiary LTCV Credit in 2020, but growth in the lending business has been slow.

“We’ve been very frugal in our capital structure. We’ve just kept adequate capital in the NBFC to keep it going and meet all the regulatory requirements,” Pande said, adding that the idea was also to be able to “unlock the value” at the right point in time.

Finance Buddha aims to use its immense database to enter other lines of business such as insurance and non-financial consumer-facing solutions like white goods, automobiles, holidays and travel or education.

“There is a massive data analytics play here, in being able to create a bunch of signals which go beyond credit underwriting and the financial ecosystem,” Pande said, adding that the agent business has a huge role to play in this.