India: Lenders eye e-commerce through vendor financing

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On Monday, India Infoline Finance Ltd, a non-banking finance company (NBFC), and Snapdeal, an online marketplace, announced a partnership under which the former will offer working capital loans to registered suppliers of the latter within three minutes under a so-called “capital assist programme”.

The official release said that the two “aim to reach 500 merchants and disburse about Rs.200 crore worth of loans through this platform by the end of financial year 2015-16”.

On 9 September, while speaking at a PHD Chamber of Commerce and Industry event in New Delhi, State Bank of India’s (SBI) deputy managing director (corporate strategy and new business) Sunil Shrivastav said that the bank is ready to finance entrepreneurs in online space because the bank sees potential for growth there.

The emergence of unicorns (companies valued at more than $1 billion), and the rush of venture capital, private equity and hedge fund investments in the e-commerce space have attracted the attention of banks and NBFCs. They want a piece of the action. “Banks want to be a part of it per se as it is an emerging area and has a lot of requirements,” said K.V.S. Manian, president (corporate, institutional, investment banking) with Kotak Mahindra Bank Ltd.

Over the past year, Kotak Mahindra Bank has started providing working capital through vendor and inventory financing programmes to entrepreneurs, who are listing with online marketplaces.

“There is a great opportunity in the online medium for artisans and smaller brands. The challenge of access has been taken care of by various marketplaces, and banks are now providing access to capital,” said Rohit Bhatiani, director, Deloitte India.

Over a period of time, many vendors have established themselves and lenders can verify their antecedents (and details of their business activity) through partnerships with online marketplaces.

“Given the growth witnessed and data available, lenders are comfortable lending to them,” said Bhatiani.

According to a Mint report, Snapdeal claims to offer more than five million products across 500+ categories on its platform, with over 25 million registered users and 50,000+ merchants.

“Many merchants have multiple listings across various marketplaces, and the whole segment has come up in the past one year. As more venture capitalists come in and the segment grows, we will see how we want to go about it,” said Smita Bhagat, co-head of e-commerce and head of branch banking at HDFC Bank Ltd. “Around 52% of our branches are spread across semi-urban and rural areas. We are happy to work with new clients from these areas,” said Bhagat, adding that the bank has witnessed reasonably good success in this segment.

According to Bhagat, even sellers from tier IV and V areas are able to sell their products online.

The sellers are extended credit, based on their turnover and credit worthiness.

Apart from extending credit, lenders are also customizing solutions for this segment of sellers, such as facilitating transactions, providing cash management facilities, payment gateways and foreign exchange services. “We are looking to add value in terms of any corporate banking services requirement for these vendors,” said Manian.

Also Read:

Small Indian e-retailers face the heat as big rivals FlipKart, Snapdeal, Amazon expand

Online retailer Snapdeal ropes in ex-Bharti Retail executive, as head, infrastructure

This article was first published on Livemint.com

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.