Shruti Aggarwal (Stashfin) on Building a ₹2000 Cr Profitable Lending Business
In today's fast-paced world, entrepreneurship is more than just a buzzword; it's a journey filled with challenges and triumphs. Shruti Aggarwal, co-founder of Stashfin, exemplifies this journey. From her humble beginnings to creating a successful fintech company, Shruti's story is one of resilience, innovation, and a commitment to serving the underbanked in India.
Check out the video of the conversation here or read on for insights.
🌱 Early Life and Education
Shruti Aggarwal's journey into entrepreneurship began long before she started Stashfin. Born into a large, traditional business family in Delhi, her upbringing was steeped in conservative values. With a family of around seventeen to eighteen members, she was one of the most educated individuals in her household. This environment fostered a competitive spirit, pushing her towards academic excellence.
Attending a convent school, Shruti was exposed to a structured education that emphasized discipline and hard work. Her father, keen on ensuring she remained focused during her college years, set a condition for her college choice: she had to pursue chartered accountancy alongside her studies. This decision became a pivotal moment in her life, fueling her determination and work ethic from the young age of nineteen.
Academic Pursuits and Early Work Experience
During her third year in college, Shruti embarked on an articleship with Price Waterhouse Coopers, balancing her studies and work commitments. She completed her chartered accountancy degree in 2002, marking a significant milestone in her educational journey. It was during this time that she met her now-husband, who later moved to the United States for further studies.
Following her graduation, Shruti moved to the U.S. to join him, under the condition that she would continue her education. She enrolled at Columbia University, further enhancing her credentials. After securing a job at Merrill Lynch, she found herself in a rapidly changing economic landscape, which would eventually lead her to explore entrepreneurship.
🚀 First Steps into Entrepreneurship
In 2009, after the downturn that followed Bank of America's acquisition of Merrill Lynch, Shruti seized the moment to venture into entrepreneurship. With her experience in finance and a keen eye for market gaps, she launched her first business, Secret Cache, specializing in swimwear.
The Concept Behind Secret Cache
The idea stemmed from her observations of the Indian market, where quality swimwear options were limited. She recognized that while American brands offered various styles and sizes, Indian consumers were left with subpar options. Shruti's venture aimed to bridge this gap by sourcing high-quality swimwear from the U.S. and selling it to Indian consumers.
“I wanted to provide Indian customers with the same variety and quality that I had seen in the U.S.”
Her business not only catered to individual consumers but also involved B2B transactions with hotels in tourist destinations like Goa.
🏠 Transition to India and Family Life
After successfully running Secret Cache, Shruti and her husband decided to return to India in 2012, where they welcomed their first child. This transition marked a significant shift in her life, as she balanced motherhood with her entrepreneurial aspirations. Shruti spent time helping her father with his business and exploring new opportunities while raising her family.
In 2016, with a newfound sense of purpose and a desire for flexibility, Shruti decided to dive back into entrepreneurship. Her husband, who had extensive experience in private equity, was also ready to start his venture. Together, they began brainstorming ideas that could address the financial needs of the underbanked population in India.
💡 The Birth of Stashfin
The concept for Stashfin emerged from their personal experiences and the challenges they faced in accessing credit in India. Shruti's husband, despite having a solid financial background, struggled to obtain a credit card due to his lack of work history in India. This highlighted a significant issue within the Indian banking system: many individuals, despite being financially stable, were deemed "new to credit" and denied access to essential financial products.
“We realized a massive gap in the market for accessible credit solutions.”
The couple set out to create a platform that would cater to the needs of the middle class, providing them with the financial tools necessary to thrive.
Funding and Initial Operations
In February 2016, Stashfin was officially incorporated, and they quickly secured their first investment from Chris Kolenaty of Snow Leopard Ventures. The initial funding allowed them to kickstart their operations, which began in the drawing room of Shruti's father's abandoned home, where they operated with just a printer and an internet connection.
“Starting in such humble surroundings taught us the value of resourcefulness.”
The early days were filled with challenges, but their determination to make Stashfin a success kept them focused on their vision.
📈 Establishing Stashfin: Challenges and Milestones
As Stashfin began to grow, they faced numerous challenges, particularly in obtaining regulatory approvals. The journey to secure their NBFC (Non-Banking Financial Company) license was fraught with hurdles. However, their professional backgrounds and investor support played a crucial role in expediting the process.
Securing Regulatory Approvals
In January 2017, after a rigorous application process, Stashfin received its NBFC license in record time—just two and a half months. This achievement was a significant milestone for the company, allowing them to operate as a legitimate financial institution.
“The NBFC license was a game-changer for us. It meant we could control our own destiny.”
With this license, they could provide personal loans directly from their balance sheet, setting them apart from other fintech companies that operated as mere marketplaces.
⚖️ Navigating Regulatory Landscapes
As Stashfin established itself in the market, navigating the evolving regulatory landscape became a critical focus. Shruti and her team recognized the importance of compliance, ensuring they adhered to the guidelines set forth by the Reserve Bank of India (RBI).
Adapting to Regulatory Changes
Over the years, Shruti observed significant changes in the RBI's stance on credit and lending. The regulatory environment evolved, reflecting the growing need for consumer protection and responsible lending practices. Stashfin adapted to these changes by continuously refining their business model and ensuring their operations aligned with regulatory expectations.
“Staying ahead of regulatory changes is essential for any fintech company. It requires constant vigilance and a proactive approach.”
Her commitment to compliance has been a cornerstone of Stashfin's success, fostering trust with customers and investors.
💼 Understanding Stashfin's Business Model
Stashfin’s business model is built on addressing the credit needs of India's underbanked population. The company offers personal loans that cater specifically to individuals who struggle to access financing through traditional banking channels. By leveraging technology and data, Stashfin provides a streamlined application process that minimizes paperwork and maximizes efficiency.
Core Offering: Personal Loans
The primary product offered by Stashfin is personal loans, which are designed to be accessible and user-friendly. The average ticket size for these loans is approximately ₹25,000. This amount is strategically set to minimize risk while still meeting the needs of their target customers.
“We believe that individuals will repay loans of this size, as they are often aspirational borrowers looking to improve their financial standing.”
The focus on this demographic ensures that Stashfin fills a significant gap in the market.
Technology-Driven Approach
Stashfin employs advanced technology to facilitate the lending process. The company utilizes machine learning algorithms to analyze customer data, allowing for quick and accurate credit assessments. This technology-driven approach not only speeds up the approval process but also enhances risk management.
“Our technology allows us to perform up to 44.1 crore API calls annually to assess creditworthiness and fraud risk.”
This data-centric methodology is pivotal in ensuring responsible lending practices.
Revenue Model
The revenue model of Stashfin is primarily based on the interest charged on personal loans. The company aims for a net interest margin (NIM) that reflects the difference between the interest earned from borrowers and the cost of funds sourced from lenders. This model is crucial for maintaining profitability while ensuring competitive pricing for customers.
📜 The Impact of RBI Guidelines
The Reserve Bank of India (RBI) plays a significant role in shaping the operational landscape for fintech companies like Stashfin. Over the years, various regulatory guidelines have been introduced, impacting lending practices and business models.
Adapting to Regulatory Changes
Stashfin has navigated a series of regulatory changes, particularly during the COVID-19 pandemic. The RBI's introduction of moratoriums and ex gratia rules required Stashfin to adapt its operations rapidly.
“We had to educate our customers about the implications of these changes, ensuring they understood that moratoriums were not a waiver of interest but a temporary relief.”
This proactive approach helped maintain customer trust during uncertain times, allowing Stashfin to uphold its reputation as a responsible lender.
Digital Lending Guidelines
In June 2022, the RBI implemented digital lending guidelines aimed at ensuring fair practices and protecting consumers from predatory lending. Stashfin welcomed these regulations, as they aligned with the company's commitment to ethical lending.
“We’ve always prioritized responsible lending. The RBI’s guidelines only strengthen our approach and help us maintain our customer-centric philosophy.”
📊 Growth and Financial Performance
Stashfin's growth trajectory has been impressive since its inception. The company has successfully scaled its operations while maintaining a strong focus on profitability.
Loan Book and Disbursement Rates
Currently, Stashfin’s loan book stands at approximately ₹2,000 crores, with monthly disbursements ranging between ₹300 to ₹400 crores. This consistent performance showcases the company’s ability to meet the credit needs of its customers effectively.
“We underwrite around 90,000 customers every month, which reflects our growing reach and the trust placed in us by borrowers.”
This scale positions Stashfin as a significant player in India’s fintech landscape.
Financial Efficiency
Stashfin operates with remarkable efficiency, boasting a headcount of just 170 employees while generating a revenue base close to ₹800 crores. This translates to an impressive per-employee revenue of around ₹3 million, highlighting the company’s operational prowess.
“Our lean structure allows us to be agile and responsive to market changes, which is essential in the fast-evolving fintech sector.”
💻 Leveraging Technology and Customer Feedback
Technology is at the core of Stashfin's strategy, enabling the company to enhance customer experience and streamline operations.
Customer Interaction and Feedback Mechanism
Stashfin places a strong emphasis on customer feedback. The company employs chatbots to handle initial customer inquiries, which helps gather data on customer experiences and pain points.
“Our customer support team plays a crucial role in understanding the voice of the customer. We hold regular meetings to discuss feedback and make necessary product adjustments.”
Continuous Improvement through Technology
The integration of technology extends to the underwriting process as well. With automated systems and data analysis, Stashfin can quickly assess the creditworthiness of applicants while minimizing the risk of fraud.
“By reducing the manual workload, we can focus on refining our product offerings and enhancing customer satisfaction.”
This commitment to improvement is key to Stashfin’s ongoing success.
🌐 Future of Fintech in India
The future of fintech in India appears promising, with significant opportunities for growth and innovation. As the market matures, companies like Stashfin are well-positioned to capitalize on emerging trends.
Opportunities in Health Tech and Beyond
Shruti believes that sectors like health tech will see substantial growth as consumers seek more accessible and affordable healthcare solutions.
“The intersection of technology and healthcare is ripe for innovation, and fintech can play a pivotal role in bridging gaps in financing.”
Continued Regulatory Evolution
As the RBI continues to refine its regulatory framework, fintech companies must remain agile and adaptable. Stashfin's proactive approach to compliance positions it well to navigate future changes effectively.
“We view regulation not as a hurdle but as an opportunity to enhance our business practices and build greater trust with our customers.”
The evolving landscape of fintech regulation offers both challenges and opportunities, and companies like Stashfin are poised to lead the way with their innovative solutions.
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