Godrej Capital is a part of Godrej Capital, which is non-bank lending money to investors. It has decided to progress towards lending money to small business investors in the next three years. This information was made public by Manish Shah in an interview.
Godrej Capital company has decided to give micro, medium and small loans to small businesses. These loans might not be very secure, but they are capable of providing a supply-chain product that can yield money in just six months.
The company has made the decision to manage ₹6000 crore in the financial asset by the end of this year and increase the assets to about ₹30,000 crores in FY26. Godrej Capital is the collaboration of two Non-Banking Financial companies, namely Godrej Housing Finance, which lends mortgages, and Godrej Finance, which lends finance.
The range of home loans is from ₹40 lakhs to 1 crore. This shows that professional workers working at big companies have lots of customers. But loans taken by small businesses have a ticket size of about ₹1.5 crores on average. These loans are mostly loans against property (LAP). Godrej Capital has been planning to increase the business and range of products by taking loans under LAP. If the loan is taken for a shorter period than that under LAP, then the business loans will range from about rupees 10 lakhs to 25 lakhs.
It has been observed that people often take loans against property for longer tenure with a larger amount, and they are mainly focused on capital. But in the next three years, Godrej Capital will change the scenario for small businesses. According to Shah, loss, and gain have to be adequately balanced for the best results. The home loan provided by Godrej Capital might yield relatively lower results, but it also provides lesser risk.
Godrej intended to become a good employer and cater to the increasing credit needs of small businesses. While supporting the small business, the company will have to face competitors from banks, fintech, and non-banks who would use their latest technologies to underwrite loans. There are almost 110 million workers who have small businesses, and they contribute about 30% to the GDP of India and 45% to the exports. This information was given in a report by CII and KPMG.
Godrej has already spent rupees 2700 crore in the Finance Service business, and there might be more expenditures depending on the need and performance of the business. Since Godrej Capital is getting immense backup from the main company, it would not need to raise the finances until the end of FY24.
The one drawback might be the fact that they are still borrowing from the banks currently, but there are certain Non-Convertible Debentures and short-term Commercial Papers. The company will also search for foreign sources for borrowing and create external borrowings this year.
The borrowings are easily available, and Godrej Capital has good bonds with financial institutions. So, even if there is a high cost of borrowing it is well-managed.