Building BNPL for education | LEO1

The best businesses are built not by perfectly executing a business plan, but rather by being agile and listening to the market, and being willing to switch gears when needed.

The story of LEO1 is the perfect example of this principle.

Rohit Gajbhiye is an IIT graduate who spent a few years working at a bank in Singapore. 

He decided to come back to India to try his hand at entrepreneurship so he started FinancePeer- a peer-to-peer lending startup.

But showing remarkable agility, he soon pivoted the company to become a leading player helping fund school fees for parents and FinancePeer was renamed to LEO1.

LEO1 has introduced an innovative fee payment model that is helping Indian schools to receive the full fee at the beginning of the academic session. The model also facilitates a no-cost and zero-interest EMI for parents.

This unique fee financing model has created a win-win situation for both parents and institutions.

Rohit shares his journey of discovering product-market fit for LEO1, and the journey of building multiple moats for what is a very profitable and sticky business. 

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Additional readings:-

1.LEO1’S Unique Fee Financing Model Making Quality Education Accessible To Parents In Karnataka

2.How fee financing is creating a win-win situation for parents and schools

3.Education’s commercialisation: Unraveling the constraints

4.“Blended education is the way forward for the education sector.” Rohit Gajbhiye

5.Financepeer founder Rohit Gajbhiye features in Forbes 30 under 30 Asia list

Read the text version of the episode below:-

Rohit: Hi everyone. I'm Rohit founder and CEO of LEO1.

We are an embedded finance stack for education ecosystem. So we have comprehensive financial solutions to solve for their core problems which is essentially fee collection problems and liquidity problem for the parent to pay fees. We have multiple products embedded into one stack we have not just lending which we started with but we have payment solutions we have card solution. We convert ID cards into ID plus prepaid cards.

So converting a campus to a cashless campus and along with ERP, we offer this as a holistic solution to the institution so that it's not just solving their loan problems for parents it is holistically solving their fee collection and liquidity problems for parents.

Akshay: Interesting. And this is for what level? Like schools, colleges what is the market that you're catering to? 

Rohit: We had started from schools and colleges with the card segment for colleges where we have started with but this fits for K-12 and colleges both. Less for preschools or for alternate segment but more for K-12 colleges.

Akshay: And what some numbers that you can share what is your ARR or how many users and how do you measure users? Do you measure users as the students as the number of institutions? Just some metrics that you can share around the business.

Rohit: See basically how we have grown from the past three years in our first year we were working with around 24 schools. That time it was K-12 segment and we did roughly around somewhere around 5 crores of this disbursements in the first year. 

Akshay: Because it was a lending product. So this five clause is what you financed parents to help them pay the fees. 

Rohit: Yes, That year was completely into lending. So in the year two from that we went to an earlier around four 50 institutions just about touching 500 increase our disbursements so financing to around 10 million in year two. And then in year three from there, we went to around 2,600 plus institutions. And we have done a hundred million dollars of disbursement that was our last year. And this year again we have paired up with around 11,000 plus institutions and India touching more than 5,000 plus pin codes already. And we are expecting that it may not be direct multiple, but at least 250, 300 million that we may touch in terms of lending volumes because this has been our genesis, we started offering the zero cost DMI product back in 2019. But apart from that in the past 18 months or so, you'll see in the fee segment. We have processed more than a hundred million dollars of fees, and that's not lending, but parents have started using our platform and paying fees also and it's in the same institution. So they're not two institution. Some people pay fees via the platform. Some people dig the loan options, right? That's the second offering. If you look at the ERP our software is deployed in more than 360 colleges across the country. Again there is roughly around 2.7 so roughly 300,000 plus students, teachers, and parents all using our platform. These are active users so these are still there on the software portion.

So that's something that has been done before. Our card product is recently launched less than two months since starting the product. We have around two and a half lakhs students who have subscribed to the cards so that's in progress for this year. 

Akshay: Amazing. So let's talk about the journey of getting here. I believe you were working with like Development Bank of Singapore. What is that like a world bank kind of a organization? What is that?

Rohit: It's a private bank. It's private com public bank back in Singapore. So it has taken over POSB, so it's like the SBI for Singapore.

Akshay: And what was your role there? 

Rohit: I started as a graduate associate. I was selected straight from the campus. And initially we were to work on multiple projects. So we started with if you have heard about PELA which is used back then in Singapore. We worked on that project. We worked on developing a credit line and account opening for exchange students. From there and up completing that first year. Then we went into the credit and liquidity risk segment. This was the area where I had an expertise in which were more into the FIDM space. So it's finance risk data mart. So we were developing the finances data mart for the bank taking help of Moody's risk engine. And that's where my area of expertise lie so I used to compute all those ratios and understand. The financial health in terms of the lending lines, in terms of other treasury inputs that we have done. So all of this regulatory reporting was managed by my department, so I had that expertise first in DBS. Of course then post DBS. I had gotten into a healthcare venture as well, very small in like nine months. We started a company called, forget to remember, in India. That was in India but I was still working in DBS at that time. So I had not left my job. 

Akshay: DBS was in Singapore!

Rohit: DBS was in Singapore. Healthcare actually was started from Singapore working with the other fellow co-founders in India. And we had developed a concept of medical adherence for organ transplant patients. Concept went well. Prototype came in place initial funding came in place but our team collapsed. By the time we all decided to leave our jobs and. Take it to the next level. So that was my first failure. And obviously healthcare was in my space. The CEO of that company was someone else back in India. 

Akshay: And what does this medical adherence what does that mean? There a transplant patient needs to follow certain diet and exercise regimen, and then you build an app which sends them notifications and nudges. Was that what I mean? I'm just guessing. 

Rohit: Exactly. You exactly captured, you can nudges for the family members along with the patient and a doctor. So that the doctor and family member you essentially tell them if something is not happening. Because here are what happens even if you miss single medicine on time basically the problems could get severe and you even on cost structures it could mean a lot for the family right? So adherence means a lot in terms of the organ, kidney, liver transplant kind of major issues. So that wasn't my area of expertise. Healthcare space of course I was looking at the finance and tech piece for that entity. 

Akshay: It doesn't sound like a large TAM for a product like this. I mean, how many people would be doing organ transplant? 

Rohit: No, there is essentially the idea is if you look at TAM in terms of number of people or if you look at TAM in terms of the cost structures involved so these are two different ways of looking at it. So if you actually look at organ transplant in terms of the cost structures involved it's very heavy. And if developed nations it's much larger as well. Even you don't really need to capture volumes of customers, but it matters in terms of the number of lives that you impact rate. So it told, it was, but of course the product that we have today, the time wasn't as big as what it is today. It but of course the ticket size also is very different from what it was in that segment versus this. 

Akshay: So you left that company and it carried on, or the business shutdown?

Rohit: We actually sold it to the investor itself. He's just using the app and not running any other segments of the businesses. And as soon as I started, I know there are going to be challenges. We have to tackle it. I had a different learning in terms of team selection and especially in terms when it comes to co-founders as well. You have to be very careful what you have to define upfront first stint lot of learnings from it. And post that, I was working on the ideation which became as. 

Akshay: What went wrong? What was your learning from it?

Rohit: Yeah. So see how that company was formed? No. While I was back in DBS, there was a program called Stanford Ignite Stanford GSB program only. So DBS has sponsored me as an entrepreneurship program into that. And as part of the program we had multiple projects. One of the project was this project. We then studied through this project we pitched through this project and we ended up those team members were my team members during the course as well and post the course, we just took it a step forward and the trouble was of course we were placed in different countries. You are not at the same location. We did expect a lot from the venture we did get the first round of funds also. But knowing the founder in terms of the risk taking ability was not done before because that 3 to 6 months was what we have spent with each other. That was the only time. And I it was a shocking thing for me also that the other people who were so passionate about this suddenly start feeling a bit cautious in terms of the risk that they're taking. So that last mile that you have to cross the other fellow founders could not. So that's when that was but I accepted it. I'm still friends with them. No, it's a tough decision for everyone. So different learning for us.

Akshay: So then what lend to Financepeer? It was you started by with the name of Financepeer at that time, so tell me about that.

Rohit: The name Financepeer because the first thing that we started with back in 2018 was peer two peer lending. We were rather one of the first three ones to receive a P2P lending license as well. So we started a concept back then and it became very popular because there was a lot of reasons as to why I started P2P lending first. I was doing lending in a developed nation so I knew how things are run and what digital lending means back then and India even if we had to say you a digital bank and digital lending all over and we know the level of digitization that we can bring about in this process, right? So, you know, it was very funny when I came back in India multiple times and I wanna take a loan from my course, probably my bank balance was larger than the loan, but it was in the n account or it was in my Singapore account. And the banking processes here would not lend me an amount where my savings is larger. That was very funny you have an enter account sitting, but you just have such a rigid policy. So obviously borrowing was difficult and from that day I understood borrowing is not just difficult for people like us. But a lot of doctors a lot of police officials and there are a number of people I can say self-employed. A lot of those customers, new credit customers a single mother, these are various cases where borrowing is very difficult and if it is large amount of borrowing because if you look at companies defaulting, it's large in terms of personal loans. The default is not really affecting lenders that big but it was very difficult. So that's something that I realized. And second thing is, of course, the interest that the person is making on an MD they have an intent to contribute to the society, but it doesn't always have to be in the nature of donation you can help each other and still make some interests outta it.

So I just thought at back at that time, this wasn't a regulated space. And when we started, there was no regulations here P2P lending 2017 when brainstormed and got all the things together. 

Akshay: How did you find next set of co-founders? For this peer to peer lending?

Rohit: Yeah the next set of co-founders for me were from my own space. So they were my friends either in my college so for example, the trust was already there, trust was there. The kind of work that we compliment each other was already there because we did that before. So one of my founders was my batch mate and I, I knew him pretty well and we did a lot of assignments, a lot of project work together, so I knew how we compliment each other. Another of my co-founder was again in the same Stanford program. Then we were friends throughout after that I knew what kind of developments he's capable of, what he has done. And the fourth one was my brother himself. So again I knew his specialty, so I just had to get these three guys together on the same page. Explain and build that relationship before we sign up into a firm. So we did that in 2017. We really didn't sign up and establish an entity. Immediately.

So we did that exercise and once we were comfortable with each other and we had complete trust and the most important aspect of passion, that was the beginning of how we started. Of course, P2P lending is what made everyone come together. And it wasn't regulated papers was very attractive. We developed our prototypes and we evaluated it with a lot of customers potential customers back then. And we saw a lot of demand on both ends and slowly it so happened that people started making more interest than in an FD and people on the other side, demand side, people started borrowing at a lower cost than a bank. They were actually borrowing money at around nine to 11% and then FD. It was like a same day kind of all. We had already defined the policy. We have fed it into the engine so the things were going very well. 

Akshay: Did you build us off your savings or you raised funds also for this?

Rohit: Initial portion we did it out of our savings. 

Akshay: And how did you prevent risk? Because when you're taking money from consumers I mean, they're not like mature family offices or HNIs or institutions who are okay to take risk. You know, some, like an end consumer, like a doctor who has excess cash. If he is giving that money to the platform, he would never imagine that he can lose his money. What did he do to PR to prevent?

Rohit: Yes. At that time we used a lot of alternate data. We built a lot, like we used to use the email, text, scrap at that moment. And it was allowed back then. So, that gave us a lot of readings. We were not very rigid. If there is a bureau score, which we were hitting, that we were heading multiple bureaus to understand not just the bureau score, but their payment behavior as well. That itself gave an indication. If not, we went to the income source, which could be a bank statement. We had an analyzer of it that helped us. Even if that is not in place and if you give me any other proof of your earning which comes via email, sms, that also suffices. If not, you give me official receipts that also suffices. If not you know how a microfinance works multiple people come together in terms of guaranteeing. So we had establish all these mechanisms so that the chances or approval rates are larger. And it really worked. We had zero default in a year. None of our customers did they fall back then.

Akshay: And was it one-to-one lending, like matching people with cash with people who needed money?

Rohit: It wasn't one-to-one. It was always a one-to-many approach because the basic concept of de-risking on the lender's front, So you are telling them some return returns, right? So they're making more money on one borrower. They're making less money on the other. On an average they will get their return, but even if one or two borrowers default, no, they will still not make losses.

Akshay: Capital will be protected. 

Rohit: Capitalist protector. So that's how we always had diversification for the lenders from day one.

Akshay: And what was your take rate? 

Rohit: Margins assessed. 

Akshay: Yeah. What was your margin?

Rohit: So, for us essentially in P2P, it wasn't a very large to be honest we used to return around 9% to lenders. And from anywhere from 11 to 15% was our borrowing rate. So from 2% to around 6% is what we used to make on the spread. Again that 11 to 15 basis, your credit score. So if you're a very good customer we will only make 2%. Okay. 

Akshay: Okay. So yeah, year one went very well. Zero losses. How much did you disperse in year one in p2P? 

Rohit: We started small. Overall in the entire year we did roughly around a nine grows only. So that wasn't a big number but that was the first year. And the knowledge awareness was very low. People did not in India the awareness was very low. It the concept did exist in the west when we did a cooperative research but in India it wasn't as popular. But we had enough lenders through wealth partners who came on our platform, and we had enough borrowers who directly came or through, came through a lot of DSAs.

Akshay: And you were giving a margin to the DSAs? 

Rohit: Yes, there was a, if the DSA comes in, then there's a normal margin that they have to also make. but in that year one itself more than 60% of the portfolio to us to my surprise as well it was from education space. And what I understood, the back then, the assumption that I went to before I went into the data was mostly this could be customers for the higher education space it's either a postgrad program or a study abroad program, etc... But most of them were actually from K-12 and UG. So people were taking loans of 1 Lakh of 2 Lakhs and they were willing to pay 11, 12% kind of an interest on it, but they wanted to put their kids into those schools and colleges. From there I started digging going deeper into this because at my time, honestly, 6 rupees to 10 rupees a month, that, that's the kinda fees I, so this kinda 1 lakh and all was like okay man I probably have I'm probably too old to come back now it was a rustic change. If you look at it probably 15 years back someone was paying like a four, 5,000 per annum was a rich kid and 15 years later you come back and someone who's paying 50,000 is an affordable kid. No, that that's the kinda fee bracket that happened. And if you look at the income sources, they're nearly the same.

They're gradually income. Your average income of our work income hasn't grown at that rate so obviously this problem was about to come, but when I first looked at the data, I was like, oh my God, they're billing to pay and the school fees are really large. The schools I went to also stay more fees now. So that was a space I interacted a lot with parents. I interacted a lot with the schools initially, and we understood that this is a very good segment from two perspective our understanding of the space was good because we honestly, all the co-founders were, came in from a background where we were luckily able to get scholarships to cross different stages, right?

I didn't really have that amount of money to take anything at leisure or even buy books at that ma to use friends books and all of that. So we understand a lot of our friends could not make it. So how much it matters if you don't have that fun kind of a backup. So that was one reason we chose this space. It related very well with us for us to dig in and become more passionate. And secondly if you look at the space it's a very noble cause you're actually educating every kid. And the default is are inherently not built into the model because you are one year into the institution if you're not paying for the loan, essentially the institution also gets alarmed that this parent may not pay me the next year or they withhold the mark sheet probably for a week or so just to exert pressure. And you will see there's no default happening when it comes to your kid. Parent doesn't want to have any kind of name shame or any kind of default that happens and any reminders with respect to your kid. So, and for our lenders, it was a next game. And back then when I did an education was P2P, right? Lenders are very happy. If you look in P2P lending to anyone taking a personal loan, you don't know the end cause vis-a-vis someone who's actually, you are just putting your money into a school or a college, not into a personal account. Lenders are very comfortable and we were able to expand a lot on the supply side when this came in. So that's when we first created a pivot. 

Akshay: So you created a category o on your platform saying education loans or education, something like that. So we created a yeah, but the supply was all like people with excess cash. 

Rohit: Supply was from individuals. 

Akshay: So like retail, basically retail.

Rohit: And these, it is not new to them. It's like, for wealth partners who are there in the city they diversify the wealth of their clients. This was one of a new portfolio for them and they were taking it to wealth, especially if it's an education segment. They're very happy. Because they know if you're making this return in this space, they have a lot of plans who want to create an impact as well. So it was a very good fit for us. Yes, education portfolio became our first pivot, and we only and only focused on education so we understood that we don't have to go after DSS is again and again. A third reason why we took that. Also know with DSS every month you have to do your sales. So if you're just sitting out, your business will not happen, and you have to generate demand. In this B2B space, which you went into, schools fees are paid every year. So the ones which have partnered in the previous year, this year, even if I don't have to acquire new customers, your business repeats, right?

So repeat value is large. Your lifetime value of your customer is very large so say seven years on an average as an LTV is quite good. That was one point, first pivot. But of course, we did pivot from P2P also. We established a parent entity, which was into technology of the money that we had put back then all four of us had already exhausted on our money. And this became a regulated space. As soon as this became regulated, there was a need for 2 crores, minimum funds, and then over and above we had to operate on the compliance. So of course, the cost structures came up and we had ended up on our savings. So we went into fundraise. We did that raise also. So we were still lending via P2P to the borrowers in education. But demand went so high because we used to do B2B partnerships we didn't directly reach out to parents. We reached out to schools and colleges. They told their parents to pay fees via us. suddenly in 2019 the demand went very large. And in terms of the supply, we were not able to match that rate of growth. So P2P had their restrictions. So P2P at that point in time no they after like being regulated every individual cannot put more than 10 lags. And then the restrictions started came coming in terms of the amount, so, for us, we had to choose between the two. Either we focus a lot on the demand and solve this education fee as a problem or we focus a lot on supply.

But at one point in time we could not do both the things. So we decided we'll focus a lot on the demand and we'll solve for the education fee problem. Whereas with respect to supply, what we have is good, but what we can do is we can start integrating with NBFCs and banks and then use their books to lend to the customers. So we started doing integration piece, that's where our tech entity was born, and the tech entity then integrated with other lenders NBFCs and banks, and they integrated with our own p2p also as one of the lender. So our lending became not only from P2P, but from other lending options. The supply automatically increased, so we didn't have to work on a day-to-day basis, and then we focused on getting into the demand space and understanding the space better.

Akshay: When did you do the NBFCs tie-ups? 

Rohit: In 2019, so 2018 we were only doing p2p. And from 2019 between somewhere from Feb to May where our demand suddenly increased a lot. That's the time. I think around after May we started going to NBFCs and we partnered with them and then we started matching the supply.

Akshay: And when did you raise your first round? 

Rohit: It started back in February and March, and by around May to June that year, eight. We were able to pick out there. 

Akshay: Okay, so almost immediately after raising the first round, you started the NBFCs, and this this must have been your peak season, right? Because generally March, April is where you have to pay your school fees. 

Rohit: Yes. It was at because first year we majorly worked with K-12 from second year that bias towards fee cycle went away because of various other reasons like colleges and new admissions and all of it. But in your one, You were majorly working at K-12, so that April till July was kind of a peak.

Akshay: So, a couple of house, how did you raise funds? Like, you know, any like any tips from there? Like, you know, in terms of was it that the business was doing so well that it wasn't a struggle or did you have to struggle? And how did you crack your NBFCs deals? How did you crack the institution, tie ups, the school tie ups?

Rohit: Our model was definitely good at ltv. Repeat values were all good and, but we hadn't done enough in terms of the seed stage we had to go to Angels first, so we understood when we had to raise our first round, first thing a season was in place, so we need to raise it. Quickly. So had we gone via traditional raising route, it would've taken us probably nine months or so to end six to nine months to close so we went by the angel route. We spoke to a lot of angel companies a lot of angel investors who we met in the Stanford program as well. And from there we could pick up right? But again, it wasn't that I had a conversation once. Probably not even exaggerating my, I would say more than 120, 130 pitches minimum that I did to get my first angel on board. And I changed a lot of the deck because they used to give a lot of feedback and a lot of the business model was also, enhanced after receiving the investor feedback and how they look at the models as well. So that happened, got in the first check. And as soon as you get the first check, the next check quickly follows. Right? So it's always that ways..

Akshay: Because there's validation then that someone is putting in money.. 

Rohit: There's validation. If someone is putting as a chunk, you get a lead. And then it was done to an angel round for us and the other angels, they're all in conversation but as soon as they saw the first term sheet and money coming in, then we were always oversubscribed. So first round also we had to give it a stop and then we went ahead from it.

Akshay: Okay. Amazing. And how did you crack the institution type? The school type..

Rohit: School type was a very interesting way that very different from NBFCs. For NBFCs, we use that investors to talk to them. And try and get the first partner. Use the first partner to get the second partner. Go one to one because we didn't need a lot of NB Cs even two would five. 

Akshay: And these are like new age NBFCs or like traditional new age. 

Rohit: They are smaller new age NBFCs, but smaller book size. But they're willing to do this. They're willing to explore. And we were very clear of course we go to a larger one. They want to see a lot of history and it's a classic chicken egg problem. So you had to approach someone for whom even, or one or five close per month make some difference so we approach those. NBFCs first bought a few, and on the school side we had a very different approach of going, of course we, we didn't want to do a on street method, which would be capital intensive as well. So how should we go about it? So what we did was we created a network called Channel Partner Networks. A lot of people now use the same coin the same word but essentially people who know the trustees of institution because we want to go top down. It's a financial decision principle won't be able to take that decision. It's a trustee who is able to bring that into picture. So bottoms up, knocking the doors of a school, talking to admin municipal, that's a longer way, capital intensive. We ha needed people who can influence or who are directly connected to the school owner the trustee.

If there's disbursement happening in that school, I do a ref share with the channel partner. So we started a channel partner network who were primer facing some of the school owners themself. They were chartered accountants, there were ex-bankers, there were some celebrities, and there were many people who knew the owners closely. And as soon as we pitched the product, they were like, yes, this is a problem. I know it very well. I will give you this, give me this rev share. And we started establishing that in the first year itself we had around more than 70, 75 of channel partners Pan India basis. And these were the partners who spoke to institutions for us. They kind of did the first work, and then we kind of came into, in the closer conversations, that's how we things. 

Akshay: But how did you identify you can't run a Facebook campaign to find such channel partners. How did you identify and reach out? 

Rohit: So, it was more an organic play so first institution for us was Masuri International back in Masuri, the Masuri. Once we had that institution we went into common forums in that city and we got hold of other. Owners, then the city had small media channels. Then we spoke to them, this is happening in the school, and we used them to get to other players. Hey, that was one area that we did. Then through investors, we reached out through to a few CAs and ex bankers, because investors always had their own bankers and chartered accountants and they got us a few schools. So what we did from this, we then reached out to school owners and we told them, you get us this and then we will have this structure with you. We will recover the subvention cost only if you refer to another institution. So we started a referral program, but very close nexus with school owners chartered accountants and ex bankers. That's how we started. And then the CA network started connecting us to more and more people who were not the school owners, but they became a channel partner again. So this is how it started to spread. 

Akshay: I think the one big learning from this is how getting angel investors in early can really give you a leg up in terms of how they unlocked so many opportunities for you.

Rohit: Absolutely. I had always believed the, with respect to investment is not just the money because I'm not like a repeat founder when I wanted to start this so obviously with the money, if the network comes in it will solve for the chicken egg issues. So the person has to play a role. And in all my investor conversation, I'd always been clear with them, even with the institutions today I'd always spoken there is something, and that is why I'm with you. So it has to be that you also play a role apart from the monetary monetary support there..

Akshay: What's a good playbook for reaching out to Angels? Did you use LinkedIn messages or did you ask for referrals and use your network or..

Rohit: So, there is no hard and fast playbook when it comes to a fundraise perspective. Also, everyone can do it their own way. They have to have enough confidence in doing so. Cause few conversations can change the entire landscape for you, the first few conversations the, if the other person believes you in the first few conversation and you will explode on the network that can be built up on it right? So your pitch matters. The way I built up was, of course, I had my connects. So the it alum network, which I utilized, and these guys were connected to a lot of funds, a lot of angels. Some of them were the angels themself the seniors, they had enough money, they're working abroad. So I used them. That was one area. Then I reached out to a other, like Indian Angel Network and Mumbai Angels, then Angel Bay. So I basically reached out to them because they made us talk to a lot of other angels, like Devex and others. So there were few which I knew were around, and I started speaking to them. They started arranging the calls for us. That's the network, I think the IIT alumn network. And this one helped us a lot, even before we went to any investment banker. Actually, the first stage was only through these kind of an engine network and few networking sessions that I had. Been part of before.

Akshay: Okay. So yeah, let's continue the journey. So you got these NBFCs on board and now you had a the problem of supply was solved once you got these NBFCs on board. 

Rohit: Yeah. So once that happened first 24 was more on the K-12 side and we were still discovering how to penetrate. So initially when we started the model we had a B2B tie up with the school, but the schools did not sub vent it. Initially there was an interest bearing on the parents but the schools promoted us so that there's a loan facility for you. 

Akshay: You need to define sub vent for people who are not from the space. What is prevention? 

Rohit: Yeah. So prevention means whenever you hear about this zero interest product.. So it's not that it's actually zero interest, someone is paying for the interest either the end customer or the product provider. So in this case, if the interest is own by the school, then it is zero interest for the parent. So when I say subvention is basically sub venting that interest component. So school does that. 

Akshay: Instead of giving a discount you give zero em. I And that interest, your bearing is equivalent to the discount you would've given otherwise to increase your sales. 

Rohit: Exactly. It's very popular for the car consumers to understand. In the consumer durable space, like when you buy a laptop or television, you buy it on an EMI. But the television or laptop provider has a partnership with say Bajaj or others, where actually the interest, the subvention or the discount is given by them to the financial provider. It's very simple. The same thing here in Subvention. Yeah. 

Akshay: The whole BNPLs industry is built on this basically.

Rohit: Exactly. Very similar. The schools actually give discounts to us. But even before we went into that model, the first thing that we started was we didn't ask for that. We just had partnerships. We asked the schools to please bring this awareness that we are there for the parents in case they need our help in terms of paying the fees. It got popular. And when we went into schools to further promote this we understood that schools are already providing discounts. It's not that we asked for it. The schools, you will see most of the schools, most of the popular ones. Also you must be aware of if you're paying your full year fees on day one, the schools were themselves willing to give a good chunk of discount to the parents because schools were facing this problem of collecting fees on time from the parents. So they promoted that you pay upfront, I'll give you a discount. So I have my growth and working capital issues solved. But in spite of them pitching, hardly three to 7% of the parents were paying their fees upfront. The remaining were choosing, they still chose to pay in quarterly installments so this wasn't new. And when we observe this, we are like, why are we asking parents to pay their interest? The school is willing to give a discount.

We go to the school and tell them parents don't have liquidity. We bring in it, we bring that liquidity in. You get past that discount to us, and we will make it zero interest for the parents. So we will not charge them. Because why should we charge them if the school is willing to give? 

Akshay: It is zero interest irrespective of period. Like normally in BNPLs you have for example split into three emis, which is zero interest, but if you want to pay over a year, then you have to bear some cost on it was there something.

Rohit: Yeah, so we not very similar to that because BNPLs, like you said, credit card, BNPLs is more like a three month things, but for us it was per annum so you pay our per annum fees, like 12 installments or nine installments if you exclude the vacation. But that's the period you get at zero interest. Now, if you want to go beyond a 12 month tenure, because you're already into the next year of education, and if you still want to go, it's not disallowed, but the idea was you clear your fees before you pay for the second year fees. And that's when we subvention model became popular first 24 schools. We are not very popular on subvention side, but our first year, first three months, we understood this and then we started approaching schools. And that one year from 24, suddenly we crossed a 400, 450 around in that year. And that's where it picked..

Akshay: 2019 financial year. Were you? So, your peak season is like this March, April, and this is when in 2020 Covid hit did that have an impact? 

Rohit: Yeah, it actually overall I can say it had a positive impact, but definitely it had an impact in terms of how to plan the business and restructure things to adapt to this.

Akshay: Because even schools stopped asking for fees and they gave extensions. And parents also were up in arms. Why should we pay fees when it's just one hour online class? Stuff like that. So I mean the it must have like been a jolt. 

Rohit: Yeah. I mean, see that, that's how the, that's how our assumptions and our advisors also came on board on how should we go ahead. But it was very interesting how that they were actually turned out to be for us. So, but 2019, first half was about K-12 schools. Second half, we onboard a lot of colleges also UG segment. Right? And when you went into 2020, both of them are functioning good. And this when the covid hit the first..

Akshay: One quick question. By this end of financial year 2019 was it all tech based, onboarding, et cetera? 

Rohit: Parent onboarding was all tech based? Yes, but school onboarding wasn't completely tech based, so it was actually physical documents that we used to sign. But on the parent side, yes, it was tech based. So lending to parents hosting. 

Akshay: They could download an app, send their Aadhar, Pan, whatever information you wanted, all through the app they could do. And then they would get an approval to pay by install it.

Rohit: Online. Everything online, yes. 

Akshay: And the school would circulate a link to parents that if you want to.

Rohit: Absolutely. So once we sign an agreement with the school, which was more on a physical nature, after that the school in their fee circular, they'll announce that you can pay. This is a new mode of payment. You can use them. They will circulate an email put us on their ERP. So that whenever a parent is coming to pay fees, they'll understand, put some, stand these brochures in the campuses, right?

Akshay: So that's an activity that we do together for a parent. The advantages that instead of paying quarterly, they can pay monthly. 

Rohit: That was only one of the advantages, better cash flows. So when we started itself, we gave them a second advantage as well. First of course, was like zero interest. Why wouldn't you take, you can make more money elsewhere also.

Akshay: Anyway, the zero interest is there as a quarterly installment for them quarterly. 

Rohit: So typically the way it happens, if you're paying one la say 25,000 in every quarter, instead of paying 25,000 in April, you can pay 8,000 so in April, then 8,000 in May. 8,000 in June. So, So there's an net present value benefit that parents, if they're more financial savvy, they can make on it. But apart from that, we started offering free insurance. So if you're paying your fees via, at that point of time, it was financed bureau. If you're paying your fees via finance bureau, you are ensuring your kids. So if tomorrow something happens to a parent in the form of accident, in the form of hospitalization, some permanent disability, then we take care of your kid not only for that year, for the remaining tenure in the same institute. And this is a classic case that happened with us also where when brother who was supporting his younger. One had expired and the younger kid is still completed his education where our insurance helped him. So that's something that we added on for the parents, along with the normal zero posting.

Akshay: And that insurance covered the entire, like x number of years, which is left in it. The schooling.

Rohit: It was five years, but it kind of suff suffice or 60 months. But on an average it kind of sufficed for them. Yeah. So that was a benefit. So the journey from there was after school, college, of course we came into 2020. 2019 was quite good for us. Good amount of disbursements happening. We onboard a lot of colleges, which we were supposed to serve in 2020. So we are very excited about it. And then Covid happened, of course. The first thing, even before we go into business, of course Covid, what it did to us was everyone went to replanning. We had terms she'd committed. Of nearly 1.5 mil at that point in time, which was big amount for us that time. And that term sheet, first one could not go through because covid hit and their liquidity came into a problem. The second term sheet again we signed one investor taking the full round. And because of Covid the same issue. He's postponed it from the month of Feb till the month of May. And we still did not receive the money in May, but he was still committed to it. But we had to move on so we had to get we had to terminate the term sheet. 

Akshay: How much time did you have at that time?

Rohit: Three months. Three months. after May we had three more months. A very delicate situation. And that point in time, of course, the advice given to us but a lot of investors and advisors back in then was to, manage cash flows. You know, go through this reduction exercise, save money and extend your runway. But you know, it was also a critical time for us, a second year, and it was a good scale a previous year. Schools needed us more today than the last year, and opportunity was big. If you look at the opportunity during Covid schools are not able to collect fees. And parents have, it wasn't just the liquidity problem, parents had a liquidity issue because they knew that if they're not going to office, some, anything could happen with their jobs.

Akshay: Lot of people received pay cards and got laid off and Exactly. 

Rohit: There's a lot of pay cards. So the need for money for parents was more for schools, was more, and parents always told the school that I will pay in as many installments because I don't know if you are going to stay or no. So in the need for installment was very large. So the way we looked, the founders looked at this like on a big opportunity because our product is now more needed than before. But of course we had some with the investor advisors back then that no. Instead of letting go, we should actually take a stand and just go ahead trust our business model, then just go aggressive. So instead of reducing the cost and all of it, We actually ended up increasing, we took a debt to extend it by another couple of months. And initially before the debt, we reduced our runway from three months to one month. And it was a big big thing that we did. 

Akshay: What did you spend on acquisition?

Rohit: So the school acquisition. So we rather expanded the team. We didn't go through any single cut. We went with a normal increments cycle. Proper increments, no cards, more people hired. And it would look absurd, but it did wonders from, no one had reached a thousand institution partnership before that, right? That 400 plus we went to 2000 plus institution in that single year. That's the number of partnerships that suddenly 10 million of disbursements happened. Revenue started coming in. This became super attractive to every investor. Everyone wanted to reinvest in this model that year changed it and if today, if you look at it, everyone goes in this school financing space. But that was the year which defined it. Everyone went on back, foot. But we really took it very aggressively. And today, all other players who initially didn't want to enter the space, you will see many players entering this space so that is the year which actually created 2020. It was a very big year for us.

And the big best point for us was, you must have met a lot of school owners. They typically like to sit face to face and sign an agreement so signing up schools. So signing up with schools wasn't that easy in 2019, but 2020, suddenly they started accepting digital practice. So people are signing agreements online. They are using all digital signature format to complete the formalities. They were accepting standard terms, they're coming on calls and finishing it up. So things became fast. We could talk to schools fast, we could talk to parents through webinars. Actually turned out to be good because I would be not give benefit to Covid, but digital adoption was very large, 2020 and 21. So parents and schools, they used to come. So obviously a cost of acquisition reduced and we could scale at a different pace from homes itself. So that helped 2020 and 2021 for us became one of the like profitable most of the most revenue and most partnership for us was those two years. It gave us a big boom. So both step, we took back in the month from May, but it turned out to be wonders for us later. 

Akshay: And, you raised I think 2.3 million series A around in 2020?

Rohit: Yes. Roughly around 3 million. It was a bit spread out. And yeah, so one of, we took fund from one of our good NBFCs back in Rajasthan who understood. So along with their funds, they gave us lending lines. So in Covid times, we did not stop lending so that NBFCs supported us. A previous NBFC supported us, so we could, we were not getting rid of lending at that point in time. 

Akshay: Amazing. I can see there are about some, maybe 40, 50 investors listed. For that round. So again, you must have been doing a lot of meetings. 

Rohit: Yes, many meetings. Many meetings. I didn't even have to look at my pitch deck. I just had to start at end, even in my, I could see I could give the same page phone. But yeah, I did a lot of virtual meetings and a lot of funds, but at that point in time, those funds did not accumulate the money into their account and transfer it to us. You would see a lot of people on the cap table because those funds, at that point, they centralized it, but every individual had to deposit the money directly into our account, and that is where they had to come on the cap table.

But essentially that time the round was led by this it was led by MS fin Cap, which was the NBFCs started US based NBFc, and then by RM Ventures like a form of RRP Industries and Gala Group. These two ones actually supported in a big way. And then the other funds Gto, Devex, Angel B, these were other groups who came in and they wrote in their angels as well. And then HEM and others as well.

Akshay: 21 again, you raised about a six and a half, 7 million round approximately this time with more institutional funds. 

Rohit: This time with more institutions. So this time around, of course, we wanted to raise a larger check as well because we were seeing that growth happening. And in terms of acquiring, we had to say either, We stop at this number and then try and go deeper with the same economy, or we do that economy of scale and put more money and get more institutions. So we decided that we'll put more and get more institutions. So it had to go with time. So 21, while we were still tackling the growth, because reaching in like less than three years to a hundred million of disbursement, it actually shook the market. And we had a lot of new partnerships that came into picture. So we had to adapt to it. We had to get a lot of data work done digitally. So while we were doing it, we said okay we'll raise a small and we'll do it one by one. Of course, we didn't wanna dial it together. A lot of steak also. So we started going to institutions that year, 2021 is when we started approaching institutions because they felt us better.

Akshay: But why did you need funds? Your school, your sales process of onboarding your sales is essentially just the sales through the school you're not doing B2C or retail sales.

Rohit: To the parents, an acquisition cost or more to acquire the parents because in an institution, if there are say a hundred parents even if you're partnered with the institution, just the fee circular and email does not convert parents into taking a product, right? The school has to tell them, because these communication, typically a school communicating with the parent is more on academic front when it comes to fees. People just know this is the fee payment date and they just come and pay so to be, to make them aware is where our cost structure started coming in. So we had to do events in the campuses to let people know that firstly zero interest EMIs is not any kind of A scam it's an actual lending product that we have built. So you don't have to be scared. So people had to get accustomed to it, and we had to go through different kind of behaviors from the parents also. So classic example is if I had schools in north, in Delhi side, I had schools in the south, in Chennai area, also in the north, when we did this exercise with parents, a lot of parents they had the stigma of taking a loan. So they went back in their homes and they used to call us and take the loan, but in front of each other when the events happening, they would've, I don't need it, right? They felt ashamed to take a loan, but if you go in the south, it was a huge queue so people were not ashamed today. So it's a very different behavior. So for us, acquisition happened across the country not in the east, but it was in southwest and north, and behavior pattern was different. So we did a lot of spending to understand the parent behavior there.

Akshay: And, were you are not lending on your own books you don't have an NBFCs license, so you did not need capital from that perspective, like otherwise.

Rohit: No, we did not a capital requirement or majorly on the tech development followed by the parent acquisition because see when we started doing the lending P2P itself has a lot of development. When you have to manage multiple stakeholders in a single loan, you manage more than 10, 15 people so that itself had a lot of development. Apart from that, our tech stack had to be digitally integrated with the lenders because if you work manually, then the operational levels were very large. And this integration with lenders, we started working with large lenders and large large nfcs and banks as well at that point in time. So integration required a lot of tech resources to get that product integrated and get into the system, build our own LOS and LMS, this loan operating system, loan management system, get into the reconciliation processes. So the tech buildup took a lot of effort and major actually if you look at it, we were very clear even when we started this that any business model is not just about acquisition. It has to have a retention and engagement perspective to it. So we always went with this ARE approach our approach where retention, engagement, products were being built.

Now this was R&D for us which today you look at it as payment platform, as cards, platform as ERP. This is not built overnight like two months, three months. We knew we had to build this. There is people are not one waiting Malone multiple times in a year. So for them to stay put with you and then come back in the following year and for the school to stay put with you and not, no, you don't have a drop off, you need to have a retention engagement product. So we are working on that elements. That's where we needed most of the funds for. 

Akshay: Got it. I guess to scale this from the demand side you can't be continuously taking workshops and doing offline events. So instead if you integrate whether schools payment is handled by you entirely, then it's a lot easier to direct the flow towards zero EMI. 

Rohit: Exactly. That's what we did. So we built our own fee module. That's the first fee module that we built. Then we acquired an ERP to on top of the fee module and we started deploying it in institution. Now that implementation itself also is a tedious exercise because schools are, do not have teams which are very tech savvy in nature. They have some kind of a technical debt on their side as well. So that integration, so we got in a fee module first so that know this happens digitally. So that was the idea. 

Akshay: And fee module most schools would be to adopt because it's how they survive. Whereas ERP would take more. And this ERP is like a free product for them. It's part of your retention.

Rohit: Exactly. This was a cost structure for us, to be honest. It's retention engagement aspect. Revenue was still the lending piece. So much of deployment. So much of integration. But that is, As a free product offer to the institution. We have developed retention engagement on it, but at that year it was a cost. Today we are converting more, so it's becoming more revenue from there, but it was a cost back then. 

Akshay: And the fee module is what it's essentially like a way to send reminders to parents and have a payment gateway where parents can come and pay from any method that they want to add accounting. Like who's paid, who's not paid, stuff like that. Like that's sort a fee module does 

Rohit: Exactly like you pointed out. The fee calendar of institution is integrated so we know which student has to pay when. So there are automated reminders. And once the fee is collected, the institution has given a dashboard. So the data econ can happen on the institution's front. Who has paid, who has not paid, who has partially paid? And for the partial payment, when to trigger the link. So that is taken care by the software. And while doing the payment, there will be every option available. It's not just you can pay via a debit card, credit card kind of a thing, but you will have facility of taking a loan as well. So then fee data is already integrated into the loan platform, so you don't have to resubmit it. So a loan taking process becomes simpler for the same payment. 

Akshay: Do you get a payment gateways have a processing fees? Like it's typically I think less than 1% or something. But do you earn that..

Rohit: We do very less to be honest, because again like I said, right, we had planned of this as a retention engagement. So then at that point in time we did not build this as a revenue center, but we do have some revenue share from there. On the payment gateway side, typically the PGS already work with. Schools, colleges, but their cost of funds to them, their rates are a bit larger unless they're working with very large group.

But if you work with a school or a college, which only has 5 crores of collections or 10 crores, you know, they charge them more on a debit and credit transaction or a UPI transaction. But when we integrated with a PG and then brought our entire payment solution, the same, PG looks as us as 11,000 institution, not like one institution.

Akshay: Power of collective bargaining. 

Rohit: Yes. So we get at a very low rate and we pass it to the institution. So wherever we have integrated, we haven't actually matched or increased. We've actually decreased their cost. So if they were paying 1.1% or 1.2% of a credit card, they will now pay 0.8 0.9%. So they've actually reduced it. And for us, either we make no revenue or we make like a 0.1% on the top. 

Akshay: And, which company did you acquire for ERP? Or did you just acquire the software? 

Rohit: We acquired a company, it was the back then called QPIC It was a Carola based entity. It has its ERP and MET few colleges in Bombay as well, and then some in Bangalore, like Jen. So it has their ERP there. It was working in less than 50 institutions when we looked at it. And we had a good amount of institutions, so we just took over the full firm with all the products they developed, merged our fee product into it along with lending, and then we started offering that to institutions without a cost. And the integrations take time, so hence we were only able to do around 360 in the last year. 

Akshay: What is the integration needed? You mean like the migration of data? 

Rohit: Yeah. You pointed out in integration involves a lot of data heavy work data mapping has to happen cause they're already working with a legacy system or they don't have a system right. Either ways. You'll have to do a new spreadsheet. So data, mapping, data and flow before they put into the system the data recon. So this effort has to be done on both sides and getting that into a framework, then giving that solution to them. Once we give it to them, then they have to do a lot of configurations. Configuration is the easy part, but the entire data flow into the system is something that is a back and forth process. 

Akshay: And what all does this ERP manage? What are the modules in it? 

Rohit: We essentially manage end-to-end segments. Like it has all the inventory management tools with them. It has all the transport management tools with them, hostile management academic library management tool, examination management tool assignment correction, online classes as a tool. All of this was available. Lead management was the plugin for us, and then other models were also built in. 

Akshay: And this also colleges or both colleges and schools. 

Rohit: Originally when we acquired the entity, it was into college space. So majorly you'll see all placement module, alumni modules, K-12 is as a subset. So typically they have built for college, which actually had more pieces to it in terms of accurate edition as well. But if you go down to K-12 segment, we just had to reduce the compound. 

Akshay: Okay. Got it. So 2021, you raised the next round and you also acquired this ERP company, and so you were investing in retention and engagement in 2021. 

Rohit: Yes, we were, I majorly investing in the RE component of it. Second thing, this is a creator market, so there's a lot of stigma. So if you compare a creator market versus getting into a market which is already created, For example, today e-commerce is created like a flip card and Amazon. So now if you build something into that space, a user is accustomed to buying something online. But here a user is not accustomed to paying their core fees via loads. They're accustomed to paying your study abroad fees via loads. So we know this is a creator market. People are not accustomed to it. It's like I have a habit change that we are calling out for. So it will take some time in terms of product built up to understand the persona, and then it'll also take some time in terms of deployment because it's a slight habit change. So that point we were on the build phase and the following round that we did, we. I had a very clear understanding that this is what we are building and what kind of change it'll require. And we had proof cases where we had shown those pilots where it worked, but to scale it up you can't take these products on a larger groups. And once we started working on that, then we started expanding on the school partnerships. So we went very aggressively not only focusing on Mumbai, Pune or Dehradun, Dehradun was the first market. We started very ex extensively in the Hyderabad, Telangana segment, AP segment. Then we went to the Rajasthan segment, then we went into a lot into the north eastern. We slowly started eastern segment. We initially avoided because it was a credit negative zones, but this time we had more I would say more grip on the supply side as well, on the policy side, on how the parent behavior happens, we always had a default rate of less than 1.5, 0.7% kind of a default rate. So we know this could be managed well. So we focused a lot on institution partnerships, first stage one, then go into lending stage two, and then you get all your RE products into the same institution. Right? So our cap costs initially go and increase the top of the funnel. So 21 was top of the funnel, year 22 for us was not top of the funnel. Year 22 was different. We had already scaled our funnel, so we already crossed a lot of institution. Then for us it was go deeper into each funnel. 

Akshay: How many institutions did you have in 22? 

Rohit: We nearly reached about roughly seven and a half thousand institutions today, although we have 11,000, we could have reached probably more than 15,000 as well. But very consciously we took a decision that there are more institutions already with us. Now it's typed to go deeper into the funnel. And we had rate back in 22. We had the money as well when we raised, so we know now we can put money on deploying these products that we have developed. 

Akshay: And 22 you raised from QVD and much bigger funds. And this was a pretty big round of 31 million.

Rohit: Yes. That was on QVD. Wish Car, Arden, DMI and New Fund. Let's Venture. So we got a lot of VC round fund at this point in time. The model of course was going well, but all of us were now betting more on going deeper into the funnel. The validation that happened is that this kind of a firm has touched base with more than 10,000 institutions. That itself for them meant big because we have a largest distribution network and we are very close to the trustees of more than 10,000 of these groups. But now it's time that we can explore a lot into the education market. So the base is established. So now this fund is actually going into deployment, like even if you do the card deployment for example? No, that itself has a card printing cost to k c cost. So there is a upfront capital you have to give. Then the card goes into a student's hand and then you get your revenue back from the school there is a capital requirement there. So 22 was where we put a lot of money on the card deployment. The card development first in 22, 23, we're putting that money in the deployment segment.

Akshay: This is a prepaid card, or what is this card? Just help me understand The card product.

Rohit: Yeah. So the card product that we start the idea was, see, it's a very straightforward, I had to explain it, but difficult in terms of development side, right? Every institution they have an ID card which is compulsory for the, whether it's a K-12 or a college for the kid we convert that ID card. So on the back side it's a card and front side, basically a branded card placement. It start with, it's a prepaid card it's a first numberless ID comp prepaid card, so there's no number on the card, right? The number, et cetera sits on your app. So this number is ID comp. Prepaid card helps you with multiple aspects. One is of course EV, tap and pay works everywhere. So you can actually use it like a debit card everywhere. That's one aspect to it. You are rewarded on every transaction. You make 10% back because we have some merchant partnerships that we have established. So you, it's a reward card for the student. They use it as an idea, as an access card as well. The campus becomes cashless campus. The owner starts understanding that my school not only collects 5 crores, but I am a school whose gross fee value, like Amazon puts it it is like 15 crows when it closes, right?

So it because of that, the bank looks at the school differently so, and if you start paying your fees via the card, then there you get more rewards. If you pay on time via the cards on time fee payment improves. And so these are certain benefits that you get. You can use the same card on travel in metros as well. So it's a single smart ID card which is established for the student. The big portion that we did on the card was we got financial literacy into it so n e p, which is that national education policy it clearly stated that you would have to now build financial literacy into your courses, right? And colleges already working on it. Now, if they develop these courses, they, if they develop an infrastructure like card infrastructure to teach them, it is gonna take them two, three years with pros of Rupees as a spent today without having this upfront spend and time they get it as a plug and play. So in financial literacy, we have developed our own courses. You'll get to go through, you understand what money transaction, what a loan transaction is, what investments is all about. So you'll get all those courses also available along with your card. So that's something that we developed in the last year. 

Akshay: Okay. So students download like, say an Amity app or they download a finance here or a LEO1 app for this literacy.

Rohit: So the way we have, it's a institution banded app for the students. So they download a LEO1a pp, and if after downloading a LEO1 app they select their institution typically they don't even have to do that because it's a B2B partnership. So if there is a college which already uses our cards the data is already plugged into the institution dashboard. And when the link goes to the student the student downloads the app from the link, then the institution is already identified. So essentially when they open it, they open the LEO1 app. They will see institution branding on the app. 

Akshay: Okay. And this was prepaid card. So that amount in the card, is that a loan from you or is it like parents transferring money.

Rohit: So basically it's good because the first thing parents can track, it's not tracking every transaction, but essentially if the kid runs out of the money route of money in terms of cash, you can top it up from anywhere. Second is if you don't want the card to be used at a bar or at some, you can put those MCC restrictions and all of it so if you want it to be used within the campus, so all of that could be enabled. So that is why it's a secure card for the student so parents don't prefer always giving their own credit cards and open debit cards with all their balances. So they can give that to them. And then the students can start.

Akshay: And parents can also download the app to see transaction history and things like that. 

Rohit: They can, transaction history is available. Spend analyzer is available. So kid gets to loan learn all of this so it's a basically my time I didn't have all of this. So later in my college time I actually realized how to do a banking transaction but nowadays kids can do it with these kind of systems coming in, kids can do it in the schooling days as well. 

Akshay: And this would need to be with a bank you would need a bank partnership to issue a card. So which bank are you doing? 

Rohit: Yes, we currently work with NSDL. So NSDL payments bank. So that's some, that's who we work with at the moment. We have a few other banking partners also, but we've already gone live with NSDL today, so it's NSDL and MasterCard and Visa. 

Akshay: And there is a merchant discount rate. So you earn something in that, like a few basis points would come to you, like some sharing.

Rohit: Yes, of course. There's an interchange income, so there's some sharing that we have with the banks there. 

Akshay: And how many cards have been issued so far? 

Rohit: See, in terms of orders, we have two and a half lakhs cards. 15,000 cards are already in circulation, which the students are using on a daily basis. Probably by September you would see around two lakhs cards in circulation.

Akshay: Because I guess, July, August is when the colleges start. So that's when you would ship? 

Rohit: Yeah, exactly. So July to September is when I'm looking at an actual circulation because orders are there, but the card distribution as an ID would happen back cause we have done this majorly in the college space to start with. On the card side. 

Akshay: Yeah. Obviously. Before that they don't really need a debit card. And and so a college ID card is now replaced with this. So every enrollment a college has, you get an order for it and you send them. And do you charge for this like a one time fees? 

Rohit: See that pricing model is still under testing, but initially we did not charge the demand was too large to handle.

Then we started charging them. It's roughly priced at around 299 rupees. The card is priced as priced at that's roughly around 300. There's still enough demand to take the cards at that price now the idea is we are trying to go through the rollout process and understand our own implementation timelines and how much we can handle as a team in terms of deploying it. Then we look at it in terms of demand supply match but at the moment, yes, we charge. It's roughly at around a 300 rupees per student.

Akshay: Amazing. So, we are now at the present. Let's talk a little on what's on the future. What do you expect will be your dispersal this financial year?

Rohit: See this, I would say right now we are focusing as going deeper into the funnel. So it may not go from a hundred to a 500 mil, a disbursal. I would say roughly, it'll still stay around a 200 to 50 mil kind of a disbursal with respect to the payments, we would half a billion dollars of payments happening through our fee module. And in terms of ERP of course the consumption right now, three LA students are kind of using it. Roughly it would be seven to eight lacks a major focus on the payments and cards that, that will enrich. And of course, there would be an errand lending happening through the mechanisms of payments and cards, which I'm not accounting at the phase because like I said, it's a learning phase for us. Let us go through the implementation and understand more about this before trying to put in large numbers on this.

Akshay: How would lending happen through cards? Card is being spent by the student like, how would you do?

Rohit: Lead gen know So basically the idea is just like a fee module. Acts a lead gen for you. ERP acts like a lead gen for you, and the cards would also act like a lead gen for you. How much of the lead gen, how much is the conversion value, et cetera. That's early for us to comment on it. But definitely it acts like lead gen.

Akshay: Like says a student wants to buy a mobile phone using that card. So he would get a BNPL option there. Is that what you're thinking of? 

Rohit: Yeah, he would apply for yeah. He'll apply for a loan. He can't use the card as a credit card, but he can apply for a loan. 

Akshay: And pay through the card for the installments. Okay. Amazing. So, so now you're e entering into Bajaj finance territory also now. Amazing. 

Rohit: Aren't they doing pretty well in the consumer? You should learn from the biggies always. So yeah, they're doing pretty well in the consumer market. 

Akshay: And your margin is still around 3%. You told me in the early days the margin was around 3% on the, around disper. 

Rohit: Yeah. P2P side goes from like 2% to 6% kind of spread rate margin. Yes. It started with three on a non P2P segment, but it goes up. So it's about a four today. It goes up because your cost of finance comes down every year because your portfolio performs good. And that's how the economies are working.

Akshay: Okay. And what is your NPA rate at the moment? 

Rohit: It was around 0.5, 0.7%, but if you include the full book till today, it's around a 1%, 1.1 percent not written off there, but by the end of the year, a lot of loans will get cleared. It'll come down to 0.5, 0.7% it, but it lowers around a 0.7 to 1% on an average. 

Akshay: And how does this compare with the general retail lending or BNPL? What's the way to look at this number? 

Rohit: No, this is an excellent number. Because I have the number that I've given you is including the Covid cycle. The Covid cycle. People have seen double digit default happening, like 15%, 18%, 12% kind of thing. We never went there, we never went to that kind of a spread because we stuck to a single model in education space so compared to that, it's pretty good. Even a personal loan kind of performs at a higher default rate than we are operating at the moment. So that's, it's actually performing good, and inherently it had to, since you are going into a formal market and you know that the cost tenure is there and the kid has to take your loan again in the following year, So they will clear it at the end of the year. They may delay their payments, but they do clear it by the end of the year. 

Akshay: And what is the approval rate? Like, do you approve everyone who wants to pay through EMI or is there a drop off there? Like some people don't clear the credit underwriting process? 

Rohit: Yeah, there are a few people who don't clear the credit underwriting process we do have TC approvals. We do have a linet credit policy because there's alternate data available from the institutions as well. So our approval is typical to a bank or a generic unsecured personal loans. Typically, unsecured personal has an approval rate for around 32 to 38%. It we have an approval rate, a blended approval rate of roughly around a 64% to 65%. If you only look at schools, colleges and approval rate is way beyond 75% as well. Rate. But if I mix some of the alternate scaling segment that we finance, then the approval rates are lower on the scaling segment, so hence a blended of around 65%.

Akshay: And you said you have a lot of alternate data, including data from the institution. What is that and how does that help? Like you're saying the marks of a student, like the academic performance or what?

Rohit: Just fee related data. For example, if a fee model is in place, or ERP is in place, then in the previous year when the customer pay, what time, how much amount, that kind of tells you is the customer's appetite to pay the fees. 

Akshay: If there's a history of timely payment, then you know that the credit risk is low. Okay, got it. Amazing. My final question, what's your advice to founders who are starting up? 

Rohit: Biggest advice, I've always said perseverance. Stay in it, stay in the game. There will be pivots you, as a founder has to believe in what you're doing and what impact you're creating. So if you are passionate about what you do, That model will succeed. But you have to be passionate and you have to have the perseverance to stay in it. That's very important for every founder if it had to be a single advice, that would be on priority one for me. Cause I've seen this in the past. A lot of people say out of a hundred startups, 99 fail and 98 failed. But a lot of them don't know that out of the 99, and many people fail in the first year itself because they just try selling. They don't want to take it ahead. And people, typically, startups who have been in the space for 3, 4, 5 years, you will see most of them will make it big, right? Because they've stayed put, they have learned a lot from the market maybe in the harder way, but they have. So being in the game is a very important aspect of being a founder. So that has to be there. 

Akshay: What about org building? You know, you, what's your headcount today? 

Rohit: Right now we have less than 200 people, just around a one 50 kind of mark rate. But building is very difficult to be honest. And there is no hard and fast rule about it. It always goes by need of the r what I would suggest to founders and I've also learned it the harder way as well. Try and have someone whoever you are hiring, do not haphazardly hire you probably can go a bit slow. And if you really wanna go fast, you can do it on contract staff as well. But if you're hiring someone, take someone who's an asset to the company, that's .1. Even if you go down to even a zero def, that person should be an asset to the company. Second one, always try and hire someone who's better than you. Don't try to hire someone who will just listen to your orders so take people who can be better than you. That's, these two are very important. So just get your right person at the right place. And try to keep as lean char as possible.

Akshay: Do you mean by this? Like in terms of hierarchy, like telling people you are below him? Is that what you mean by this? 

Rohit: Not like exactly below him, but typically what happens for early stage companies as well when you're building your company, you don't have enough funds to hire experienced folk. And as you grow, you have higher ex experienced folks as well. But the earlier staff doesn't find it easy to report to an ex experience for so as you're building your company with more funds that you have, now you may have junior people, but Junior, you don't want to hurt the junior people. Or you may have a senior people reporting to a junior people, a junior person that becomes a very different graph because see, it's not a lot of money I have on day one and I build a company. Initially, you'll have a lot of people who are passionate and support you, and sometimes seniors join and they report to junior staff who has worked with you for a longer time those dynamics are not very easy. So when you're developing an char and opt chart always evolves every year for a startup. You don't have to really look for like, making everyone in the op chart happy per se, because obviously there would be some risk, but it's better you take it than delay it because internal noises increase a lot if you don't have the right op chart in place.

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