Transcript : Making Students Atmanirbhar | Prashant Bhonsle @ Kuhoo

Kuhoo is a student loan fintech NBFC platform that aims to democratize education for all. Prashant is a veteran of the lending industry, having a track record of building up HDFC’s student lending business with some enviable numbers. This conversation covers the evolution of lending in India through Prashant’s own multi-decade experience and offers fascinating insights about using first principles to disrupt the traditional way of doing business.

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[00:00:00] Prashant A Bhonsle: Hi guys. I'm Prashant A Bhonsle. I am the founder of Kuhoo Technology and Kuhoo Finance , I got an opportunity to work with Pepsi

[00:01:42] And so from pharma by stroke of luck I got an opportunity to work with Pepsi and I worked there in sales distribution, a little bit of marketing, and I'm, I moved to Pune so, and then worked very closely during the Cola war was happening, the peak 96

[00:02:01] Akshay Datt: Oh, OK. You were nothing official about it.

[00:02:03] You were

[00:02:03] Prashant A Bhonsle: nothing official. . Yeah. In fact that, that phrase was coined, the head of marketing Vibha was there and she moved to Palo Alto after that. And so as part of that, that period of peak Cola war between Coke and Pepsi. That I had one of the best experiences of my life, I was coming from a small town, a middle class family, never went out so much. And then I was out there now working in an MNC

[00:02:31] fast moving high profile, heavy density Pepsi used to hire from the best colleges across the world.

[00:02:38] Akshay Datt: So you were at the Gurgaon head office?

[00:02:41] Prashant A Bhonsle: I was in, in Puna, actually in in the market, the, and all that, and then worked there for about a year and half and. Then my mother, who is now missing me, has never gone out. So she was not keeping well. So she said to come back, I want to spend some time and all that.

[00:03:01] So when I got back to India to work with telecom actually at that time, the mobile telecom was telephone was coming to India. And so I started working with RPG Cellular, they had the license of Chennai and which became now so from pharma to FMCG now to telecom and then did all the startup kinda phase there, there was no office and we were setting up BTS Towers and all that.

[00:03:31] So did radio frequency and set up the the system and then all of those things. So did that for over two years and then I moved to Gujrat with Canon India actually. So I and worked there for about five years. Then one of the best Experiences again from

[00:03:48] Akshay Datt: that was like selling through the channel was

[00:03:51] Prashant A Bhonsle: Yeah.

[00:03:51] Yeah. So it was through channel, through direct combination of distribution channels. So I was the head of Gujrat for Canon India, I got promoted very quickly

[00:04:02] and and then I moved to, within Gujurat I worked there for five years. So then I moved to, after three years, then I go moved to Bombay. I was called to Bombay channel idc like you were saying earlier, it was direct plus standard plus service operations. And then, so a lot of engineers and service side and sales account manager, key account managers, and so on and so forth.

[00:04:26] And then Bombay spent another year or so, and then I got called through some common contact I ICICI bank started operating started going very aggressive in, in retail finance in India. They were changing that. Those were the early days of ICICI bank, 2000 1, 2002. And Mr Kamath had this vision of changing the, which he eventually did joined the banking and financial services.

[00:04:54] And since then I've been here, banking, financial services, but ICICI was, the first banking and financial service, I joined ICICI home finance business as the head of business for Gujrat State. And then I very quickly I think we, our team performed very well. We grew by, I think five seven x of what they were doing in one year, and then I was brought to Bombay and then given much bigger then.

[00:05:18] Akshay Datt: And how do you grow home finance portfolio? Like when would be like tying up with real estate developers that when they sell then you

[00:05:25] Prashant A Bhonsle: Yeah. So correct-

[00:05:26] Akshay Datt: and then through the branch network, like customer, so you open branch, yeah.

[00:05:32] Prashant A Bhonsle: Yeah. So ICICI was one of the early adopters of third party distribution and financial services.

[00:05:39] Till ICICI they were, it was a branch driven model in banking, financial services in India. Yeah. Either you walk into a branch or pretty much the branch actually till then. And then then ICICI brought in this concept of third party distribution, which is DSAs and direct selling agents and dealers and all that.

[00:05:59] I think that became their strength and that's how they could quickly grow very fast and much, much faster than both the market and the competition. And that's how we took a lot of market share from other players like HDFC established players like HDFC, SBI and all that right? Kinda

[00:06:21] market

[00:06:22] so you're absolutely right, so sourcing channels were developers in particular areas catchments. And then what they used to do was brilliantly done by ICICI actually, they would actually evaluate developers completely, very thoroughly, and they will then start approving the project upfront. And that's how the project approval started.

[00:06:47] would approve project, do the legal, technical of the project, and then lat's say this is kosher. And any customer who buys here That is how we are open to lend to those customers. We're buying property here. And that would cut much faster. Yeah, buy much faster. Because now every loan, you are not doing the same legal, technical valuation, so on and so forth.

[00:07:12] That happened the processes were very good. ICICI were the earlier adopters of technology also. So a lot of Six Sigma. So first time I, I heard and implemented and learned about I was trained for Six Sigma and all that and we implemented there very rigorously. So spent about six years, three years in and then I was given one of the dream projects that Mr Kamath had at that time of cross selling to the same customer.

[00:07:36] So over the years they realized that ICICI was growing at a scorching pace, acquiring a lot of customers in different products. And realized that.that iIf you have-, if you are acquired, let's say a customer for home loans and you've sold an ICICI a bank home iIf you have if you are acquired, let's say a customer for home loans and you've sold an ICICI a bank home loan to that customer, and that customer now comes after a year, two years, three years, comes and buy for buying a car and a auto loan, right?

[00:08:08] Then you would go through and their strength was third party distribution. So you would go and give the same pay through your nose to the dealer to acquire the same customer again all over again, right? While the customer sits in your records and databases and all. And then we realized that, there is a cross sale opportunity.

[00:08:25] Akshay Datt: . And these third party distributors are essentially like like a boiler room operation a thing where there are people sitting and calling and calling

[00:08:32] Prashant A Bhonsle: yeah. So different type of third party distributors. One, of course, like in home finance there were developers who became, so the people who were the suppliers became the point of sales.

[00:08:44] They owned the property they were selling and they were enable the financer because it improves their business. Because if there is a loan available for the property, there is higher chances that property will get sold faster. Similarly, They were third party distributors who were not suppliers, were not developers, but they had the competence to run a sales operation.

[00:09:06] So they would, what they would do and they had a catchment and they were running some of the business, so they had a customer database and all that. So they would reach out to their customer and say, I have partnership with this builder and I can get you the loan. So they become the conduit. So between the supplier and the financer, and those are called the direct selling agents.

[00:09:28] So The similar thing in auto loans also. So there are dealers who sell cars and then they become the enablers of financial, but also there are DSAs who will go to these dealers and say I can get you these loans. And then go and acquire a customer and then go and get, so these are different types of dealership.

[00:09:49] So I was part of the team that built the first, so to say, cross sell models in India. For existing customers of any bank. So we started the first half an hour loan which had become now ten second loans. Exactly. Same model, right? During early 2005, 2006

[00:10:08] I was part of the score team which is the credit scoring in the India very nascent stage. So we were doing the we were doing evaluation of the existing track record of customers, of ICICI bank, whether they're liability, customer saving bank account, or home loan customers, however they've been behaving. And then you score them and then say, oh, they are good customer and we should offer them one much lower process intensity and all that.

[00:10:34] So those, that's where they started. Now, giving pre-approved offer to, if you were a ICICI that's, so I spent a lot of time there, became a big model, large team, few 1000 people and all that. And then I got the first opportunity to, to to taste a little bit of entrepreneurship because approached after about six, almost six years in ICICI bank from in two early to mid two seven I was approached by two brothers who had gone to US for their higher Studies in late eighties, early nineties, and spent about 10, 15 years there.

[00:11:13] They got out, they started doing well. One was, and they had started that one of them had come back in 97 98 to start one of the first PPOs in India and the other one stayed back, , so they were running a BPO operation, which they sold to somebody else.

[00:11:29] Akshay Datt: What was it called?

[00:11:30] Prashant A Bhonsle: That BPO was called claims data processing or something, and it was sold to WNS, right?

[00:11:37] And these two brothers actually got know about me and somehow through some friend they wanted to come back and start a Financial services Business, in India. So they approached and because they had more US experience, knowing their experience and not financial services. So they wanted somebody else from the domain. And so three of us, they said US this student loan business is this, at that time in 2007, it was the third largest asset class there with 1.5 trillion dollars after mortgages and credit cards.

[00:12:09] This was the third largest asset class. 1.5 trillion of outstanding student loans there right? While India had four times more, the population of students and all that, and total population also. So they said, there is opportunity here and why don't we start this. And then I started understanding why is it that education loans don't happen in India?

[00:12:30] Yeah. At that time, as against 1.5 trillion dollars outstanding India had only 3 billion dollars outstanding of student loans. So it was more than multifold higher, much bigger market than all that. But and then I got into the weeds and I tried to understand what, why is that? When as an ICICI bank, we very aggressively selling home loans, two minutes credit card personal loans, and you name it under the sun all asset classes, right?

[00:12:57] We were so aggressive that we were changing policies and launching new products, new technology processes, everything. And nobody, it never occurred to me that there is a need for a student loan

[00:13:11] and so I got very intrigued, I started researching and then found out that while there is large demand, nascent demand in India for student loan the cost education has been going back forever.

[00:13:26] Loans are not easy to come by, and I, then I started asking questions. Why is that? Why everything else is very interesting for banks? Cause after ICICI, HDFC became very aggressive Axis became very aggressive, SBI got into the game, and they launched those 7% home loan product and personal loan. None were doing anything on student lending. While we are demographically one of the youngest countries in the world.

[00:13:54] We have large population of students, large school, aspiring students, middle class families. And they middle class family who understand that education is for their next generation. The only way forward right? So culturally, we were inclined to give education to our best education to our, and best education is started costing now much higher.

[00:14:16] So this puzzle was very big puzzle, very intriguing, right then I, got know, I realized went to when those established one NBFC, and the NBFC was called. And then and then I started working hard to understand the gaps, the pain point the students were facing, parents were facing, the institutes were facing, banks were facing.

[00:14:37] This is a portfolio where, which in banks is the most bleeding portfolio, which by the way is the scenario as of today. Also for last 14 months.

[00:14:48] What do you mean bleeding portfolio.

[00:14:50] Meaning very high NPA portfolio. At that time, 3 billion dollar of outstanding was there. As I told you today, there are about, I think 12 or 13 billion dollar of outstanding last 14 years has grown exponentially.

[00:15:07] However, the NPAs have remained, actually NPA so outta this 12, 13 billion dollars outstanding, 1 billion are in NPA actually six, 7%. So it continues to be a high NPA business for banks. And then logically makes sense that any business where you losing money and not making profits you would be wary to do.

[00:15:29] And then I tried to understand why is it that, why student loans are high NPA, why does that or students get jobs, it's a growing economy, 7,8,10% GDP

[00:15:41] everybody seems to be getting jobs. So why is that? So then I realize what are the pain points, their issues with the quality of education, the issues with bankers not understanding new courses, colleges, their forward employability and so on and so forth.

[00:15:57] And how would you underwrite if somebody comes to us known for a course in University of Michigan, Ann Arbor half them would not heard about it, or somebody comes and ask for course in India, where the university is a deemed university, so on and so forth, right? So those are the challenge. Then operation, operational challenges for students.

[00:16:17] So this became, then I realized this is a very unique product for an asset class, which is unique not only in India. But even if you see developed market, this is the only asset class where banks are not the primary largest player. They become largest player eventually after buying portfolio. So there's specialized players in the first marblehead and power now, and so on and so for Prodigy.

[00:16:41] So then we then we started solving those problem one by one and started this come NBFC and as a first specialized student loan company. And then

[00:16:51] Akshay Datt: Quick question here, sorry. Like starting an NBFC is a lengthy process, right? Like you to get RBI approval and all takes time.

[00:16:58] Prashant A Bhonsle: It's a robust process. It takes anything between five, six months to about about eight, nine months to get a license, and the process is pretty neat in process and all that.

[00:17:09] Rigour the process required also because you're into financial services and it has implications not only on, on the customers and it has implications on the ecosystem. So I I would not say

[00:17:22] Akshay Datt: you were like one of the co-founders of Credila like the,

[00:17:24] Prashant A Bhonsle: I was the professional

[00:17:26] Akshay Datt: the professional brought in to run it,

[00:17:27] Prashant A Bhonsle: brought in to run it.

[00:17:29] So I was the country head and because they, both of the brother did not have the experience. Neither of India or the financial services. Especially lending. And this was, they were also trying to do it for the first time but at least I knew lending I knew collections I new underwriting and I knew risk and new processes I know regulations to a large extent.

[00:17:50] So as a professional there, as a, as the, so that's what happened. And then we started that business and. And as luck would have it, and because you told me at the start that the founders are there and and they would wanna know the journey very interestingly, as luck would have it we were very passionate, I was passionate about education all the time because you can impact lives of people and you are enabling somebody's higher education.

[00:18:15] So we started building the nuts and bolts, building the product. I spent a lot of time on campuses, slept in messes,

[00:18:31] In hostels, trying to understand, and then started building the product I then got some data and did the first grade. We did, we started in on 2007 doing all of these things and for about a year or so, we were doing, we built about 40-50 people team and we had a, we built up systems, ground up. Cause nothing like this available, but nobody was doing it, it was very nascent.

[00:18:52] Only banks were doing it for for social reasons. As luck would have it when so I still remember, I think we gave the first loan of some 80,000 rupees to a student in 23rd of March, 2008 or something. And just to see whether water flowing in the pipe or not. The systems we have built, the process, whether it's working, the disbursements happening, all of those things, right?

[00:19:16] And we were very ecstatic. Thumping chest, Oh, it went through and we were happy, right. So first, And that week, 23rd of March till 31st March. And that week we must have given some four or five loans. And on 31st March beer went belly up in New York and that was the start of the financial crisis of 2008. And in between while we were doing all of these things, we had got, we got, we were very lucky, we got DSP Merrill Lynch as our minority state equity partner. So they were the partner and one of the reasons, one of the things they had agreed with us was not only equity but they had agreed that we will also participate in giving your debt whenever it is required.

[00:20:01] And that was very critical cause we are entering into a domain where, which is supposed to be the high risk domain. So unless you prove yourself in next few years, They'll be very, it'll be very difficult for you to generate debt and if in lending company can't raise debt, you're more or less dead, actually.

[00:20:21] So we wanted that. So we had done that and we were very happy that now we are now we are very passionate about it , done diligently bought business model and all that and we were pretty confident that we have succeeded. And this happened then. And after that 31st March, I think a few days later lemon happened and a few days later, Merrill Lynch happened and Merrill Lynch was the parent of DSP Merrill lynch, who were our partners. So they became Bank of America and Bank of America.

[00:20:52] Akshay Datt: It was like a distress sale to Bank of America, right?

[00:20:54] Prashant A Bhonsle: Yeah. And they didn't want to be the part of any retail cash was king at that point of time. People were preserving whatever they had and not preening themselves then and all that. So that happened and we were in, in the first six months. Then we had to go back on the street and find another equity partner. The worst time ever. So it's a classic founder, first time founder kind, first time, and even before you started, you kind of still born , right? So and you build everything and nothing. This is a headwind that you never could, anybody could have imagined, right? Envisaged.

[00:21:35] So your business was more or less done even before it had started.

[00:21:40] Akshay Datt: You only had equity funds till then, you had not raised yeah.

[00:21:44] Prashant A Bhonsle: No, nothing. Zero . And that, that was gone. So we didn't know what to do and so there were two options. I had an opportunity to go back to corporate world close it, close the shop, which was anyways, getting close to now that you not have, and both the brothers had their backs to keep your business than sold to and starting another venture capitalists .

[00:22:01] They've done a good job with all their due all three of us then decided that we'll dig our heels and and see through this phase and see if we can get out from the other side. And and mind you, me one of the toughest times of my life actually, first time and and then you realized that

[00:22:26] Akshay Datt: you must have also hired people, built up a team and

[00:22:29] Prashant A Bhonsle: Yeah, about 40, 50 people. Every, every month there was a payroll coming , so classic rollercoaster as they call it, in, in startup world, right? And none of your fault, you've done whatever, right? You could do with a lot of care and diligence, but this is what happens when classic. But also when we, so we met a lot of pride and pity people and all that.

[00:22:55] One of the meetings were with with HDFC team and Mr. Parulekar. And he's very passionate about education and even during that time, he was such a, he's such a visionary person and that's why he what he is right.and thats why hdfc is what hdfc is right? It's because he could see the potential of the business, he could see the the business model that we had built. And he was obviously passionate about education. So he said I will so he did, he agreed to then participate and took that minority stake from it and started to give money, and as they say, rest is history, and we look back and we started growing very fast. And I as that for about five, six more year after that, as country, and grew the business made it profitable. And then

[00:23:41] Akshay Datt: So was it as an HDFC subsidiary then? Like they yeah.

[00:23:45] Prashant A Bhonsle: it is now basically, yeah. Yeah. So they acquired the small stake and they let us be we started building the business again as we had planned.

[00:23:54] Akshay Datt: And they give you debt so that you could grow your loan book?

[00:23:57] Prashant A Bhonsle: No. Then so what happened was that after you got that name, Then, as you started showing growth and the seasoning and portfolio was also performing.

[00:24:07] In fact in fact one of the notable things which I'm very proud of is that in those seven, eight years of my my being with that company right from the scratch and building it from zero the portfolio for 14 years, they never crossed 0.1% in NP 0.1% in an in a industry. In an industry which is fraught with NP at 6 to 7% in that industry. It's for 14 years that company never crossed 0.1% of NP they have a 10000 crore book now, they have just slightly moved, but I think it's still not crossed I think 1%.

[00:24:44] Akshay Datt: what's the secret behind that? How did you,

[00:24:46] Prashant A Bhonsle: so, All the hard work that and research we had done, we knew we listed painstakingly every course, every university ranking, potential employability, sectorwise employability.

[00:24:58] If the student comes from, we can, we could pretty much actually profess or predict the trajectory of any student with different combinations somebody has done, let's say mechanical engineering in Trichy engineering college and now 3, 4, 5 options. They could go to MS in US, they could do an mba in India, they could join their own family business.

[00:25:24] They can actually do mtech they can do start their own business. We could now in, in Kuhoo actually we have developed on that market bubble, but we started there. We could predict what is gonna happen because we knew exactly which course, which university, which college which potential employability they're doing for stem.

[00:25:44] They're doing computer science, they're doing data science. So that work actually, a lot of research has come to

[00:25:51] Akshay Datt: and you were doing both domestic education and study abroad.

[00:25:56] Prashant A Bhonsle: Yeah. At that time, study abroad is where we started. Because that was larger tickets, demand was higher and all that over the years, because of that reason they continued to still focus on abroad education while I am focusing more on India now because I think that problem for abroad has been solved more or less.

[00:26:17] Akshay Datt: Yeah. Yeah and lot of players now.

[00:26:20] Prashant A Bhonsle: And banks also become more lenient after seeing Credila success and all that. There's an empirical data available of 14, 15 years of almost no default of if you do that, the writing, risk management, operations, right? Then you don't, people don't default. They realize that. So there is a, there is now a avail availability of loans there.

[00:26:41] But India is much larger market according to engineering, MBA coaching classes, executive education, Edtech, vocational, there's so many where exactly the same problem, which I was trying to solve for abroad in 2007 8 9 10 11. Now we're trying to do that in with.

[00:26:58] Akshay Datt: At Credila, basically you first had a curated set of colleges and for each college you had data, like average salaries.

[00:27:05] Prashant A Bhonsle: Yeah.

[00:27:05] Akshay Datt: And for the US market, this data would be readily available and

[00:27:09] Prashant A Bhonsle: Other market also . .

[00:27:10] Akshay Datt: Us, Australia, like most of these developing colleges Europe

[00:27:13] Prashant A Bhonsle: Yeah. Yeah.

[00:27:14] Akshay Datt: Would have this data. And based on that there would be a decision on whether to lend or not. And you would not lend if the college was not so credible or the expected jump in salary was not substantial.

[00:27:25] Prashant A Bhonsle: Absolutely. what look slightly at higher premium or lower amount, different combination. .

[00:27:33] Akshay Datt: And what about one part of preventing NPI is at the time of giving the loan where you do the risk underwriting. What secret at the time when the money becomes payable, like once the student graduates.

[00:27:45] Prashant A Bhonsle: Yeah, so look, the, one of the things we learned and this is a trade secret I'm giving on your podcast for the first time, is look, one of the things risk management student loan is also managing the transition of students from campus to corporate. So even if there is an intent and ability, both of students, so intent is good, student wants to repay, and also because now they have earned a good degree qualification graduate , we will be able to pay before they get the good job.

[00:28:18] However the transition is where the vulnerability is. They're the most vulnerable because invariably you expected that if you are joining a course in India or abroad and you think youll get hundred thousand dollar job, but you got 50000 dollar job or 60000 dollar job. So your planning goes haywire, here it's more pronounced. Because it's not dollar to rupee conversion here it you wanted a 10 lakh rupees job from campus and you got a 6 lakh rupees job from campus and suddenly everything is.

[00:28:56] I think, If you, as a lender, if you manage this transition, even if you've done that underwriting right and you've pegged the course, employability, future salary and all that this transition, because India financial literacy in young people generally is slightly lower than relatively others, but especially young people because we all get in middle class families, we get raised in a protected environment. You're not exposed to finances of the family or budgeting or all of those things, right? Personal finance, that's why is a big

[00:29:27] Akshay Datt: there's no such as earning your pocket money, which

[00:29:30] Prashant A Bhonsle: Yeah. Yeah. So on campus, even the best, the students do not have the appreciation of financial discipline, nor literacy. A, they do not know enough, and B, there is a discipline issue. They don't appreciate if I don't repay my loan I will, it'll be very difficult for me, especially abroad where buying the loaf of bread also you can, you should do it on a credit card or, and you'll not get a credit card and other product and all that. So bureau scores and all those things. So sensitivity to that is missing. So you manage that. A lot of customer evangelization and education was required in doing that right. And that's why so one of the reasons other than product processes and technology and all of those things we were in operation, we were also doing a lot of customer education and that actually contributed to low NPAs and all of those things. So that transition, if you manage well, that because they'll leave job. If they get a job from campus, they'll leave one city, join some other city from there, they'll leave that job and join some other company and go to some.

[00:30:38] So managing this transition and mobility for tenure, which is normally the tenure the loan is really difficult for a inbound branch model for, any bank unless you are tech enabled, your processes are very flexible and you are nimble footed, it becomes very difficult to manage. So those are the things

[00:30:56] Akshay Datt: like you would have an account manager who would call a student and like when you graduate?

[00:31:02] Prashant A Bhonsle: Both. So servicing system, once you, the graduates, there is a servicing system and may not be only (inaudible) started exactly like the way you are saying, but then we graduated to make it more people independent. Ok. So we did not have

[00:31:17] Akshay Datt: email, sms,

[00:31:19] Prashant A Bhonsle: emails, sms, auto driven and you put call up number and check and now here.

[00:31:24] Akshay Datt: And you give them the flexibility that in case. They want to reduce the payment the monthly installment they can.

[00:31:30] Prashant A Bhonsle: At that time we were doing it more selectively now with tech and all that, in Kuhoo all of these options are now on the click of the button, right? This is what I built, right? So you could self manage your (inaudible), you want, you want little, some bonus or something. All of these things they'll be able to do it on our app or web. .

[00:31:47] Akshay Datt: Got it. Got it. Interesting. So why did you leave credila like you were in a way like heading the business, growing it from zero to one, and could've been a startup.

[00:31:56] Prashant A Bhonsle: Yeah. Yeah. So no, it was a startup. It had become with HDFC and HDFC. Yeah, I was enjoying myself. We were growing. We became profitable very fast. And we were, we had the best cost income ratio as is HDFCs hallmark actually, that make,

[00:32:13] Akshay Datt: what does cost income ratio, what does that mean?

[00:32:15] Prashant A Bhonsle: So in lending, one of the best metrics or metrics that every investor, analyst or banker all looks at its cost income ratio. So your income is your name, fees, and all of those things. And minus NPA what goes out name net interest margin and all that. So what is the, you are charging let's say 15% rate of interest. What is your cost of operation NP and all of those things? So what is the spread and then net interest margin. So that's your endgame right. And then what is the cost? So at what cost if HDFC spends hundred rupees for doing X amount of business? What is the profit they generate? And if say, hundred rupees is being spent by some other people for same amount of business, what is the cost? And that HDFC is the best in the business there.

[00:33:07] So we were running a very tight operation very good. So all of those things, and it became. Very successful. And in this

[00:33:16] Akshay Datt: little bit poor, I wanna ask on cost income. So in this cost income, the cost of say the payroll, the technology,

[00:33:22] Prashant A Bhonsle: everything, all kinds,

[00:33:23] Akshay Datt: all the cost of the right. So this margin will be high if you are able to get funds at a lower cost, which like a bank like HDFC?

[00:33:34] Prashant A Bhonsle: Yeah. Cost of fund. Yeah. Yeah. Cost of fund is one, but cost of operations become then key because cost of fund, for similar players will be more or less similar for SBI SBI went to the lowest and HDFC. There'll be some difference, but there is a cost of fund arbitrage. But the cost of operation is where the game is. If you can if you, if same number of people can do more business. The same number of branches can do more business and more high quality business and keeping the NPIs low, then obviously you are more profitable than anybody else.

[00:34:07] That's what HDFC was, has been able to do for so many years. And that's why they trade much higher than, anybody else. So I was doing all of those things. I was enjoying myself, which had become a very large operation. And then I realized that over the seven, eight years, it became more or less a large corporate role. Again, in a large bank, right? And I got my blood taste, the blood of entrepreneurship.

[00:34:34] I was reaching to do something. So I then, I joined startup based out of Bangalore a tech startup. Actually, I wanted to see tech had just started happening, coming outta the the shackles and India and Bangalore obviously has been the startup capital. joined very interesting, innovative platform company called Wooqer, and as a president and the founder uh, is a very exciting guy and then grew that business, B2B business.

[00:35:04] Akshay Datt: Help me understand what was the product that they were?

[00:35:06] Prashant A Bhonsle: Product was tech platform which is given to given to all the large corporate medium corporates and small businesses to run their

[00:35:15] Akshay Datt: like a project management software?.

[00:35:16] Prashant A Bhonsle: So it was a very interesting thing. So it is a combination of project management, workflow management processes knowledge management, actually. It is something very similar to Slack. If you use Slack. Got it. Slack. So Slack plus. So very interest

[00:35:33] Akshay Datt: Slack, Salesforce, kinda a,

[00:35:35] Prashant A Bhonsle: yeah exactly. Same plus. So it was good and very exciting product. And then we,

[00:35:41] Akshay Datt: this is made in India for the world, kinda

[00:35:44] Prashant A Bhonsle: Made in India for the world, right?

[00:35:45] So we, , so I, we. For the we launched in, US Dubai, it's still running company actually. And then I got the first hand experience of how the tech world operates, right? B2B tech has few hundred people to 50 high profile techies and handling them and working with them, building the product, and fantastic experience. Intellectually very intense. And also different selling experience, different deals all that. So we launched in London, we launched in Dubai, we launched in US, we launched in India. We had already built a profitable business and I was there for about 2 and a half years or so and about 150 large, medium corporates so and that was a good model then, I got in touch with in fact Gopi, who was the founder of Incred, actually, he's part of Anshu Jain DV team.

[00:36:47] Incred one of the Investment bankers called Bhupinder Singh . He was in Singapore in Deutsche Bank and London. In Singapore, 16, 17 years in Deutsche Bank. He came to India. He wanted to start financial services business on his own and somehow he got in touch with me. He said this is what I'm planning and why don't you, let's do it together as a co-founder and all that.

[00:37:10] So I said, what are you planning? Then I was I was enjoying my tech journey, and I said, no, I'm not interested. And then we quoted for about nine, 10 months and then finally you could convince settle come back to home, which is financial services. This is where action is, and you seem to have the right combination of large corporate financial services. Then tech, and then, so this is what we want to build in the fintech, right? So why don't we do it together, so I joined as the, as the retail finance person on the table and started with them, started building that company. I spent about five years as, so

[00:37:50] Akshay Datt: this was like a lending focus. Like they had an lending

[00:37:52] Prashant A Bhonsle: yeah they are an NBFC, now that they merged with KKR so it's a Incred financer. It's a large one now. It's, they have about I think more than 5,000 crores of balance sheet. I spent five years from zero again, so this was my third startup gig from Credila to this tech thing. And then Incred, so I spent five years right from zero equity debt.

[00:38:17] Akshay Datt: Yeah. And what products were you building there?

[00:38:18] Prashant A Bhonsle: So home loans there's a separate company as the MD and C for home loans. We built I built very quickly, I, a team of 200 people, and I think 300 crores of portfolio in about two years affordable housing and then sold it to IDFC bank.And then i was also responsible for,

[00:38:36] Akshay Datt: and each of these was a separate NBFC, like the home loan business was,

[00:38:39] Prashant A Bhonsle: no, no home loan because home loan license happened separately.

[00:38:43] So that was a separate, but all other businesses happened under one NBFC license, which is student lending was one of the vertical sales handling and personal loans and two wheelers loans and so I did that for a long time and for about five years. And then Kuhoo happened and with WestBridge Capital I know we decided that it's high time that we build the tech version and analytics driven version of what we built in Credila and Linkedin and all that, right?

[00:39:16] That was why design very analog model because nobody will give us during that time 2007 to 14, was not the best time for tech and so on and so forth. And also I was entering, we had entered into a domain, which was seen as very risky. So nobody would've, Actually given us any chance if it said that we are building a tech company (inaudible),

[00:39:42] we had to show that we're doing everything diligently. So we built an analog one that auto by design and that became successful. So for good or for bad, the new players who ever followed suit followed exactly the same model and they got fairly successful. So there was a need for a business, which is now driven by the intelligence and domain expertise, which I have built over 14 15 years, used that and translated into models that is world class in terms of product innovation, in terms of technology, data science, all of those things.

[00:40:17] Akshay Datt: You've set up multiple lending businesses. Tell me that zero to one journey of setting up a lending business. And you can weave that in with how you did that for Kuhoo also.

[00:40:28] Prashant A Bhonsle: Yes. Look one of the, according to me lending business is one of the easiest and one of the most difficult businesses to easiest from the business point of view because there's always going to be a demand for lending.

[00:40:43] Yeah. You don't have to lose, it's easy to find customers.

[00:40:46] Yeah. It is easy to give money, right? one of the most difficult businesses because once you've given money, it's the most difficult thing to get it back on time and the way you wanna get it with interest and all those things. This is zero to one journey that look one of the few things that I've learned as this thing in lending business right from the beginning. And we were taught by the right people. I got lucky, right mentors and good systems, ICICI bank was amazing system technology and how leveraging works and most importantly lending business what i have understood or learnt is lending business is the business of taking risk, right? Every loan you give, you take risk. And I've seen a lot of businesses, good founders, good product, good companies, good funding, but struggle in lending because if you take good risk, you make money. It's as simple as that. If you take bad risk, you lose money. So lending business if you can manage risk where you understand risk nuances of risk, you may you have framework of managing risk when you have resilience and tenacity to adhere to that framework. And not cut corners when things go south or when things are tough. A not everybody trust the process. Trust the process trust the framework. Not everybody who knows and is successful. So knowledge is not enough. You need to have the tenacity, resilience, faith in the process, and staying true to what you had decided. Correct. These are some of the fundamental, might sound cliche, but in lending businesses, no words were more true.

[00:42:39] Correct. This is what I've learned that once you. A do thorough research, understand the nooks and corner of our risk. For example, in, just to give you an example student loan, the only risk is not the, whether I give this money, whether this guy will or girl will give me the money back or not. That's not the only risk, the risk is as, as wide as geopolitical risk. For example, if you're lending a course in US, And it impacts your portfolio, whether Trump is there, the president or Biden is the president, or somebody else is president. So those kinda things just making for the effect, I'm saying. But it does have, right? Or

[00:43:22] Akshay Datt: let's say Ukraine you, Ukraine has lot of these issues for people go for an MBBS

[00:43:27] Prashant A Bhonsle: medical, right? And for example in, when we were lending in 2000 8, 9, 10, I was making the policy writing policy processes that document still has, that we'll not do medical loans to China, Russia, Ukraine. It's still written 2008.

[00:43:42] Akshay Datt: Why? Because of the risks there. Or like you

[00:43:46] Prashant A Bhonsle: Yes, sir.

[00:43:47] Akshay Datt: To be accepted in India, the degree.

[00:43:49] Prashant A Bhonsle: Yes. Yes. That was the main risk, right. That even if you pass out from there, either doing a medical profession there and abroad is more difficult and challenging than India because the legal and consumer laws and all of those things. So that risk you run second and there are different exams which are tougher to pass if you would really want to practice there or get a job and all that. It's not only passing out and if you wanna come back, (inaudible) will not allow you to practice unless you go through process. And most of them will not pass in the first place, otherwise they won't have gone there.

[00:44:29] So those are the challenges. So those risks, if you understand the nuances of a risk well, right? I think you'll do well. And second most important thing, which is very underrated in lending business zero to one. You must either know or get competence if you don't know yourself. Competence of collection, it's a different skillset, right?

[00:44:53] And it is not only going out, knocking on the door being harsh, it's also a process. How do you do soft calling? What are the metrices to follow? So on and so forth. And no, the new lenders who do not have experience, especially the, some of the FinTech ones, they do not understand the importance of collecting money is a rigorous process, right? And you need to have that skill. So those are the things that have learned over the period of time and which seems to be helping us now. Other than that, I think the knowing the cost of compliance and governance is other thing, which is underrated, right? So drawing regulations because, Retail finance, if you're getting into retail finance, right?

[00:45:43] Retail finance is a thin margin, high volume transaction heavy business Np is not, as I said, NP is not, the credit cost is not the only cost, right? Opex, cost of acquisition but cost of compliance and governance, if you take wrong turn knowingly or unknowingly, it may well be the end of your road actually. Because it's heavily regulated business, right? So you are putting investors money at risk just knowing compliance and the lay of the land and regulation is very important. Those Are the few of the things other than that i thinks its a great business to be in because your financial inclusion in a developing country change lives and you have large impact, right? So it's a very fullfilling business also, for example, especially education. So that, those are the things which,

[00:46:35] Akshay Datt: So lemme zoom in on these things. Each of these so you said risk collections and compliance, these are like three key things to get right. In your zero to one journey.

[00:46:45] Prashant A Bhonsle: Correct.

[00:46:45] Akshay Datt: So how did you get risk right. At Kuhoo and because now you're focusing on domestic lending. At Credila you were doing international lending. So with foreign universities you have say average salary data and you have maybe some ranking data and things like that. There's a lot more transparency with respect to education, quality, et cetera there. How did you do that for India? Tell me about how you built your risk engine, your decision making engine.

[00:47:09] Prashant A Bhonsle: Yeah. So look in US also, while the data is relatively easily available, but But you do need to A, find out the right sources and whether authentic sources or not, and so on. So there are a lot of legwork there as well, right? So the the nature of the work does not change. You need to do the similar kinda legwork, maybe a little more than what we, why I had to do it the first four, five years of 2007 to 12 but here, exactly same here. You have. the NIRF ranking for engineering. You have a few other ranking for MBA colleges. You have so then you start understanding if it's a partnership business with edtechs then you understand count the party list. So then there are public domain data available of whether the edtech is good edtech or not. It's not only product, but the company will survive if you're given loan to the their students and so on and so forth.

[00:48:02] Some of the edtech companies have gone bust which has impacted the lenders because of that right so those so the risk you undrestand right.

[00:48:15] My answer to you, what specific answer Akshay is that it is a lot of hard work and leg work and research and one of the first things which I did about a year and a half back when I started on this journey is and we've been doing, in fact I've been doing this for a while. When I was at Incred we were looking at those specials and when I was Credila also, we were backend research of vocational courses, and I was personally involved in that as on, on some of the panels and stuff like that. So the work has been happening for years now and all of that is culminating now. And I'm more focused on, let's say engineering. So how many, which rankings to use whether that the data is has integrity or not, and so on and so forth. And put your feet on the ground or get some agency which is more authentic and so on and so forth.

[00:49:01] So that, those are the things happening as far as data is concerned. So we have a lot of work lot of information and knowledge there.

[00:49:08] Akshay Datt: And what were the fields that you collected for each college? Like income, employment?

[00:49:15] Prashant A Bhonsle: So background of college, when got established from that point, that how it because education also is such a education, not education as a business, the more time you spend, the better it is, right? It is a business of high trust business. So that's what trust takes a longer time to build. Harvard is a Harvard cause it took hundred years for them to reach there. So right from the year it got established. What, who are the faculty? Who are the founders? Who are the how many years, the faculties are spending there, whether faculties are coming out with research papers or not.

[00:49:50] What is the pedagogy, curriculum modus operandi infrastructure? A lot of these parameters. and it is a part of the ranking parameters

[00:50:02] so a lot of the agencies (inaudible) so we use that. We also use the data industry we on the this side, on the right side, we also do industry mapping of which industry has higher potential or demand for professionals of a particular category? Correct. For example, in US you have high demand for next, at least 5, 7, 10 years. First stem graduates, right?

[00:50:25] Large demand less supply. So it is going to continue for a while. Similarly, we're mapping for India, so which engineering stream other than which is the most obvious computer science and IT, which are the other engineering streams which have potential to get better and higher paying jobs. So those are the things on the industry side we do, and then we do the matchmaking and so on and so forth.

[00:50:48] So those are the things we, which we are collecting and stuff. Then there is a whole lot of data around the student and their profile. So past acads for example, if somebody is in IIT, Bombay and 9.7 CGPA obviously has a much better opportunity to get into a great college and because of that great job and so on and so forth, right?

[00:51:12] So past acads and how many backlogs they have, we have gone now going to the extent of now analyzing entrance test scores slicing for example, somebody has given GRE or CAT or GMAT or TOEFL or IELTS what score has a higher potential of impacting what risk, right?

[00:51:36] For example, great great score on, on quant, less score on verbal may also mean that they might find it difficult in the soft skill sections to get a better job, correct. So those are the correlations that we have started making.

[00:51:52] Akshay Datt: And these are like self declarations. The student declares what was his score and yeah.

[00:51:56] Prashant A Bhonsle: No, we take yeah. No, we have to take, as a part of the documentation process, we take the scores and lot of these now are digitally available today. It's not so much of in earlier days that you need to give documentation. We can pull their scores from a lot of sources. So those are the things which we were doing.

[00:52:11] Akshay Datt: . So and then the decision is a mix of potential of the student and potential of the course , got it.

[00:52:18] Prashant A Bhonsle: Potential of the student. And we have converted that into a proprietary co- credit score, actually. So that's why every student gets a credit score and then based on score,

[00:52:29] Akshay Datt: you can't rely on the traditional credit score because students would into credit, they'll not.

[00:52:34] Prashant A Bhonsle: Yeah, exactly. Exactly. . Exactly.

[00:52:36] Akshay Datt: What about parents credit score? Does that factor in?

[00:52:39] Prashant A Bhonsle: Yeah. Initially over the years the weightage has come down, especially for our score. A lot of other lenders still actually take either the collateral or parents income as the main criteria for giving a loan even the student because they don't have the kind of finesse and the data analytics the knowledge base there.

[00:52:58] But for us, over the period of time we have been able to reduce the dependence of parents. So parents, now we're taking more for A, psychological reasons, and B, for contactability purposes.

[00:53:11] Akshay Datt: Oh, so you're in a way enabling more social mobility, like kids born to, poor parents have as much of a chance as a kid born to a wealthy parent.

[00:53:20] Prashant A Bhonsle: In fact, a lot of students that we have funded in our pilot actually come from very humble backgrounds. They have got meaning we funded a few students who have actually construction laborer and house helps and all of those things. Done .

[00:53:34] Akshay Datt: And tell me about your collections process. What have you built over there? In terms of being a agile, nimble, tech enabled collections process? What are

[00:53:43] Prashant A Bhonsle: Yeah. Yeah. So we have, so it's not only collection collections starts for us with early warning signals on the portfolio. So we have because we have so much of data, around the application data, the bureau,

[00:53:56] Akshay Datt: does the student remain engaged with Kuhoo after he gets a loan?

[00:53:59] What's the student, journey first tell me that and then we can

[00:54:01] Prashant A Bhonsle: so students either finds us out or we reach out to through campus catchments or through digital BDM and all that. And then students graduate

[00:54:09] Akshay Datt: And this is for postgraduate courses

[00:54:11] Prashant A Bhonsle: largely postgraduate we're also doing some product innovation on engineering. For example, we launched the first mid course financing product in India. So if you've done two years, and third and fourth year there is a product, Specifically available. So those are things also available. But coming back to the,

[00:54:30] Akshay Datt: and also online courses, like EdTech courses, say Upgrad these kind of courses also. You would all those, all, yeah. Yeah.

[00:54:37] Prashant A Bhonsle: So if the student either comes through a directly through digital mediums or through a partner or through referrals whichever way they come and apply. Give us on a online link give us, and there's a student app that we have built, which is getting released in next couple of weeks, and they'll be able to download.

[00:54:53] The very unique thing about that we have built in India is. The students can find out very quickly after giving few data points, whether they're eligible or not, how much they're eligible for, and what kinda broad loan amount and NR and this and that I think for them. So my understanding last 15 years is students and parents, when they're doing the education planning for the kids and the students when they're doing it for themselves they, they need answers, quick answers to two fundamental questions.

[00:55:27] A, whether I get a loan or not, I don't know. And if at all I am going to get a loan, how much am I going to get? And these two questions in Indian system right now also takes anything between few days to a few weeks. So you go and apply and they'll ask you for documents and then they'll process it and then they'll come back and tell you it's not possible.

[00:55:55] That we have converted into a eligibility check very quickly. The way the decision engine runs right? So that solves a lot of problems to students. Cause then they're now clear what is the next route to step to take. So those are the, that is the journey. They can check their eligibility very quickly. And that there are, they'll get options if this is, if they want a little more loan then what are the options.

[00:56:16] They'll get it on the journey. If they want a little less loan, what is the journey? So on and so forth. They can kinda make their own loan. So that is the journey.

[00:56:25] Akshay Datt: Parents can have some collateral option to get more loan

[00:56:29] Prashant A Bhonsle: if they're willing to give it largely . But our fundamental philosophy or guiding principle Akshay has been that I want, I'm on a mission to make Indian students completely, atmanirbhar, so meaning meaning because I have knowledge we have Kuhoo has knowledge about which store, which student, which, and all that.

[00:56:50] I can leverage that and then not not give as much importance to parents as the other banks giving. So I'm allowing them to become self-sufficient or self-reliant. The other thing which I've noted over the years is Indian students all, we all come from middle class families, so they have a sense of commitment and to their parents and families, right?

[00:57:16] They know that their parents have sacrificed a lot for them to reach wherever they've reached their students, right? And given a chance they would want to now take their own responsibilities, especially for their postgraduate and all that. So there is a sense. I want to give them a chance to to be able to do that.

[00:57:34] And you can do that if you understand what students, you can tell them, oh, this is good course, I like this course. Please go ahead and do it. I think you'll do well. And so on, so forth. So that is the journey, that is the philosophy. That is the journey. We have actually enabled this journey completely automated.

[00:57:49] So they don't have to come to any branch. They can do it online. They can check the status online, and now with the student mobile app coming, they can actually do all of these things on the mobile app .

[00:58:01] Akshay Datt: And so once they how does the loan get dispersed? They need to show some proof that they have received admission. They have secured admission.

[00:58:07] Prashant A Bhonsle: Yeah. So the tuition so we fund tuition fee as well as living expenses. And the tuition fee will be dispersed directly to the university.

[00:58:16] Akshay Datt: Oh, so you have these tie ups with all of these universities?

[00:58:20] Prashant A Bhonsle: Yeah. So based on their disbursement, so the loan gets sanctioned for the entire course, but the fee payment should do in case we will disburse.

[00:58:30] So if the first semester fees let's say out of, your sanction lets a 10 lakh rupees and the first sem fees is less two and a half lakh rupees including, so the living expenses will go to students, which is normally of 20-25% of the whole loan amount but this will happen all online.

[00:58:51] Akshay Datt: And this the payment, the fee payment is automated. You directly have a relationship with the college or the student.

[00:58:59] Prashant A Bhonsle: You don't have to be in some university student shares the account. And once you've done it for one student, for a university, then.

[00:59:10] Akshay Datt: Ah, the account details are entered. You can verify next time someone shares it. And if you have a lot of students from the same college, then somebody can do a partnership with them and

[00:59:20] Prashant A Bhonsle: Correct. Correct. Yeah, got it. Got it. . And the, this dispersal is like on a like for every semester the student get living expenses at the beginning of the semester. It's not like single time disbursement.

[00:59:31] No, no single time. No, it is not single time disbursement, as in when the demand of the money is there, by the it's student and this institute. So it'll be disbursed like that, but sanction has happened.

[00:59:45] Akshay Datt: Is it on demand? Like I can take just. Thousand rupees today?

[00:59:49] Prashant A Bhonsle: Yes, of course.

[00:59:49] Akshay Datt: Oh, .

[00:59:50] Prashant A Bhonsle: Yeah, Yeah, of course. . If you want less, also you've got 10 lakh rupees, a sanction. Your fees is due for two and a half, but you only want one lakh rupees. We'll, disburse you one one lakh . . . .

[00:59:59] Akshay Datt: Interesting. So this way then he is engaged with you throughout his education. It's not like a

[01:00:04] Prashant A Bhonsle: throughout. Yeah, in fact, in some cases we do ask for how are you doing CGPA, certificate of your course progress and all of those things so we are encourage them. Students actually do come back and ask for some help and internships project and so on so forth and and we can help them with that, that as well sometimes.

[01:00:27] Akshay Datt: And like you you like, how do you make sure that they've passed out that they're not flunking, et cetera like you're sending them a notification, asking them for details.

[01:00:37] Prashant A Bhonsle: Yeah. So look if you've done invariably in 99% of the times your original underwriting has been so rigorous that these kind of students don't flunk, one. So even in those very rare cases is something like this happens, we're engaged and students also, because they know we keep telling them, like I told you, like evangelizing, educating, if anything goes wrong with you, please inform so that they can take care of it.

[01:01:05] So the student comes back sometimes, or sometimes we reach out and we know exactly. Look, if somebody is going for, let's say, fall of this season, right? We know exactly when are they supposed to pass out? Before they're passing out date or month, our team starts following them up, email goes, SMS goes, call goes.

[01:01:26] The how's it going? Where are you getting on campus? Job has happened or not? If not, then what? So we have the data, right? We just need to put it in the process. And that's what now the tech has make it made it easier. The notifications go to student, the app can send the notifications.

[01:01:43] Akshay Datt: And then once they get a job, then they work out a repayment plan that also is self-service.

[01:01:48] Prashant A Bhonsle: Yeah. Yeah. So yeah, they can do it. Or there is a plan already at the time or disbursement. If they want to change it, they can over the payment time.

[01:01:57] Akshay Datt: And you take NACH that NACH mandate.

[01:02:00] Prashant A Bhonsle: NACH mandate, yeah . Absolutely. . . . ,

[01:02:02] Akshay Datt: got it. Got it . So this this covers how you do your collections like through multiple touchpoints and then multiple, and giving them flexibility to restructure as when needed. Got it. What is your way to meet that cost income target?

[01:02:15] You must have some cost income target.

[01:02:18] Prashant A Bhonsle: Yeah. Yeah it's still early day Akshay I think we need to go the whole and how it plays out and stuff like that. I'm very happy and pleased the way it is right now panning out. Look, my my philosophy again, the approach has been that in financial services in India, if.

[01:02:36] You are solving any problem, whether it is for students or banks or for ourselves, our own balance sheet or anybody for an institute, there is now possibility to solve that problem through tech. Correct? There is a very distinct possibility. Almost everything can be sold. It's only you need to have the right talent approach and intent to be able to find and create the right product for flow and all that.

[01:03:05] So my philosophy has been, and this is what I've told my leadership team, very powerful, very high profile leadership team, has been, I've been able to hire, I think the approach is that if you are solving a problem first, get me your tech solution to it what has been a legacy thing in India? Because of cheap labor that if you have a problem, throw people at it.

[01:03:28] Whether it is distribution, also, if you want to solve, let's say, so customer onboarding or acquisition, you'll say, I'll recruit a DSA and DSA will hire four people. I'll hire 10 people, hundred people, a thousand people team, and they'll go and collect documents from the student, right? I, my sense is that my approach is that why do we need this?

[01:03:49] A student has the documents, they have on their fingertips, their mobile and whatever, and they want the loan and they're very keen to share information. This is in their favour.

[01:04:04] And this allows them to do it seamlessly and if you do that. You have actually eliminated a lot of cost. So one big cost in retail finance because it's a people, intensive business is people. So one

[01:04:17] Akshay Datt: customer acquisition like that

[01:04:18] Prashant A Bhonsle: customer acquisition, even processing, actually once the file comes, the credit processing

[01:04:23] Akshay Datt: But processing over the last few years has become pretty automated, right?

[01:04:27] Like even banks?

[01:04:28] Prashant A Bhonsle: No, not for, no, not for it has become automated for credit cards and personal loans to a large extent actually, because those are smaller loans. And credit card is pretty much given to people who are known in the financial system who have a bureau score and all that. In this for example, mortgages is, it's not as easy a personal loan because of obviously property documents and so on.

[01:04:52] So there is a lot of processing which happens at the back end. Whether the property papers are original, whether the property papers are in the link, documents are there. And similarly in student loans also, there's a lot of processing with the existing lender. What we've done is we've automated that as well. So we done digi lockers, we are extracting information from so and so forth. So to a large extent, we are kinda innovating at the backend processing as well. So for example, the entire, so a lot of information A, gets collected and then B, gets processed. So application information, past acad information, futures information, which college, which course admission, I 20 visa, all of those things and so on and so forth, right?

[01:05:37] All this information needs to get processed. Now, this information. Right now with other lenders are getting processed largely physically, they need to download the document, somebody need to sit and find out and so on. So this we have kinda automated again.

[01:05:54] Akshay Datt: Ok, so you're using like computer vision to scan the document.

[01:05:59] Prashant A Bhonsle: Yeah. Yeah. In fact, student also can actually take pictures, send documents, upload, documented the in the journey and all of those things instead of sending it on email or WhatsApp which is by definition called as a digital journey, but according to me, it's not digital journey, because you are attaching documents and sending an email.

[01:06:17] So those are the things which you're changing.

[01:06:19] Akshay Datt: The document verification is also done through computer vision, like whether it's a,

[01:06:23] Prashant A Bhonsle: yeah.

[01:06:24] Akshay Datt: That, whether the admission has been granted, whether the visa is

[01:06:27] Prashant A Bhonsle: granted or not. So those are the things which are

[01:06:30] Akshay Datt: like, it's able to parse what is the date of validity and so on and so forth.

[01:06:34] All of that

[01:06:34] Prashant A Bhonsle: some of it has already happened as a standard, which, for example, bank statements are now pretty much standard for parsing and all those things. But some of the other academic documents, and especially in this domain, has not happened so far. So this is the unique thing which developed .

[01:06:48] Akshay Datt: So you've created like the you've built that ability in-house to read mark sheets. Like your system can read a mark sheet and translate that into numbers, and then numbers can feed the algorithm.

[01:07:01] Prashant A Bhonsle: Yeah. Yeah. . . . .

[01:07:01] Akshay Datt: Amazing. . And how did you cut your customer acquisition costs? What is the how do you like get leads,

[01:07:07] Prashant A Bhonsle: get the customer right.

[01:07:09] Fortunately we are in a business where the customer is the most internet and social media customer that you can ever ask for, right? They're there, whoever is either going or studying right now, they're in some or the other virtual sites. As long as you know the customer and their life cycle.

[01:07:27] So we have mapped anybody who's going to US anybody who's studying in India or planning to study in India, we have mapped back backwards about 24 months forward, about 30, 40, 36, 48 months, 60 months. So you know exactly at what point of time the customer is doing what and then you can go. And so that knowledge is more important while while digital sourcing can be very costly and is very costly for a lot of people because they don't know where the customers, right? So they're, I think, shooting in the dark and going to Google and the search and all those things and keywords and stuff. But if you know exactly what that student is doing, at what point of time there is a catchment. And we do a lot of webinars actually where we, we tell people five things you need to know about this finance, 10 things you need to know about Visa.

[01:08:19] Seven things we need to know about. So those are the things of catchment. Go to go to campuses and create understand the the pain points there. So institutes need to collect fees and it gets delayed and all that. So can we send and partner with them and they can send the emails to so those are the things which we, .

[01:08:41] Akshay Datt: And what percentage of your leads come through institute tie ups? Say, if I'm applying for admission to Amity,

[01:08:47] Prashant A Bhonsle: a partnership not only directly. Yeah. Yeah. Partnership is a channel and within partnership, universities, institutes and colleges are there, and within partnership there are, for example, test prep centers, somebody going out (inaudible) so you partner with them so within partnership, there are student tech companies or discussion forums and all that.

[01:09:11] Right or those, something like that. So those kinda people, you, because it's enabling complimenting product for them also. Correct. So you, so partnership is a big channel, and then you go and partner with them and they'll forward Digital is one channel, digital, social media.

[01:09:30] And then referal is a very strong channel because students usually work in cohorts. One, one of my friends, I'm going to, one of my four of my friends also will do the same thing. And if I've got a good experience and a good product, then I will very well tell three other people. So referral is a very strong channel .

[01:09:47] Akshay Datt: And do you do something to drive more referal, like giving some benefits?

[01:09:51] Prashant A Bhonsle: I do. Yeah. Yeah. We do some it's again, work in progress, continuously getting evolved. But yeah, we do some vouchers, Amazon vouchers and some gadgets and so on and so forth for for good reference and converted.

[01:10:05] Akshay Datt: Ok. Ok. How did you get it off the ground in terms of funds? You need funds before you get out?

[01:10:11] Prashant A Bhonsle: I got, yeah. I got very lucky actually. I got an investor, which is one of the largest private equity funds in the world called WestBridge Capital.

[01:10:20] And WestBridge Capital now if I'm not wrong got 8-9 million dollars fund, they invested as seed about 20 million in Kuhoo. One of the largest seed fund funding in last few years in India. So I got lucky. And the great investors understand India they know education. They're very keen on education as a space in financial services. They've been, they're investors into Equitas some of the very good companies, Star Health insurance and all that.

[01:10:49] So they've invested into Kuhoo , so I got .

[01:10:52] Akshay Datt: And that because of your credibility at multiple setting up multiple lending businesses.

[01:10:57] Prashant A Bhonsle: I would like to believe that. Yeah. . Yeah. .

[01:11:01] Akshay Datt: And what about debt debt funding?

[01:11:03] Prashant A Bhonsle: I have right now not required

[01:11:05] Akshay Datt: With 20 million in the bank you don't need right now

[01:11:09] Prashant A Bhonsle: We don't need over the period or next, about a year or so we'll need it.

[01:11:13] But I guess same thing. I think if not anything I've got a little bit of credibility in this space and proven track record. So should be not as difficult. It's always difficult for a new player, but shouldn't be as difficult as it may be for others.

[01:11:27] Akshay Datt: And what has been the traction so far? What is your loan book or how many loans do you started

[01:11:33] Prashant A Bhonsle: We just start with lending as pilot we are still building out our loan origination system total mobile apps, so tech is getting built on but we did do

[01:11:45] We, our licenses in process the next couple of months. So we have tied up NBFC to use just to check the pilot and all that.

[01:11:54] Akshay Datt: Yeah. Make sure the

[01:11:55] Prashant A Bhonsle: pipes are working. And two, just some numbers actually, we've got about in about six odd months, we've got about close to 10,000 people who approached us showing interest about more than three thousand people have given us the entire document and papers KYC plans and all and we've sanctioned close to about 80 crores or something.

[01:12:19] And it's been already about 15 odd crores. And so this is the journey in last about five, six months.

[01:12:25] Akshay Datt: Amazing. Do you see this being largely domestic lending like for domestic.

[01:12:33] Prashant A Bhonsle: No, we will do as strategy. My focus is on domestic courses. However, because as a brand, I want to be the one stop solution for any Indian students who planning education, finance, right?

[01:12:48] So to that extent, we will offer all the entire product suite, which includes Indian students going abroad. In fact, right now, largely the lending has been to abroad cause the season was full but going forward, my focus more and more is going to be on Indian MBA, engineering, small ticket certification courses edtech executive education, and so on, so forth.

[01:13:11] This is where the focus will be because that's what the large need also.

[01:13:15] Akshay Datt: There could be an interesting play on this user base of students who are like starting their career. You could, for example, be the place from where they get their first credit card, one once they get into a job.

[01:13:27] So are you looking at building out those other products to cross-sell and upsell to the same address?

[01:13:32] Prashant A Bhonsle: You, you've stolen my plan.

[01:13:39] No, but yeah, of course. Look, we have this is to be more on, on serious note. This is invariably the first serious financial product in a student life, and by the virtue of the product, nature of the product. We acquire customers pretty early in their life, right? Anything between, depending on the segment you're addressing, if you're addressing k12, which we're not right now, but 16 to 24 or so, right?

[01:14:04] So invariably the first product, and this is a very emotional product for them so the bonding is much better entrance process, right? So there is a relationship bond right now, and I know exactly because of last 15 year experience. What are the other product, at what point of time they will need. Once they pass out if they're abroad, they'll need a credit card.

[01:14:29] As you rightly said, in India, they might need a small ticket, personal loan for paying deposit or buying a two wheeler or bike or something, right? So these products, we already, we know exactly what they will need over the period of years. So we have mapped about they'll, anybody, you, me, anybody will work for 35-40 years in their life, right?

[01:14:51] First 10 years is this, and then next 10 years, and next 10 years. And our tech architecture is such that we'll be able to maintain leverage. This relationship funnel that we have created and use tech analytics. Our analytics engine is very rich as we have spoken to our data science team working at it and all that so we'll be able to predict all of these things at the right time, right place.

[01:15:14] So we will have all the infrastructure readiness for this, at what point of time will depend on macro conditions, micro, other things, how compelled, what are we at that stage in terms of scale operations and so on, so forth. But yeah, largely at 30,000 feet above, I would like to be more engaged with students and facilitate more products with them as, as much as I can.

[01:15:40] Akshay Datt: Would you do this on your own books? Or say a two wheeler loan? Which would I guess be the

[01:15:44] Prashant A Bhonsle: No, I as of now it's to uh,

[01:15:46] Akshay Datt: you do this through partnerships.

[01:15:48] Prashant A Bhonsle: Largely that because I want to be focused on what I do the best, right? I know the business deeply and we want leverage the domain expertise and be focused.

[01:15:57] And this is a very large opportunity and fairly underserved. So for next lot of years, I, if I am doing the right things, and we are doing everything that needs to be done this in this segment, I think we have enough and more market opportunity to not look outside. And become the best, better than the best player that there could be in India, right?

[01:16:20] And then probably global cause of domain expertise, debt, talent, all of those things. So strategic priorities or compulsions notwithstanding in future, I would wanna stick to the core competence that you pick.

[01:16:36] Akshay Datt: So through relationships, you could even do things like selling upskilling courses, like somebody's done a comp science, engineering, maybe sell them a product management course from an ed tech which could give you additional.

[01:16:49] Prashant A Bhonsle: All the possibilities are almost endless, Akshay. Actually, we, but for example, Career counseling, right? We have so much of data and information and knowledge about courses and there is an information asymmetry right? Where students wants to do something, they don't know what is the right thing for them particularly. But those are different business lines.

[01:17:13] I want to focus on one business right now, but the, of course, the possibilities are endless once we are, we have traction, business running as usual there is a scale and profitability, then we can start thinking of diversification over the period of a year.

[01:17:28] Akshay Datt: And are you planning stuff around keeping that relationship stickier, that they're more in touch with you?

[01:17:35] Say some sort of a like a community on the app where they can talk to each other or

[01:17:40] Prashant A Bhonsle: Already built, yes. Yes. Job forum, job lister. Yeah. Yeah. Internship projects and so on. So they can talk to each, there's a community section on our app, which is well built actually,

[01:17:52] Akshay Datt: so they can talk to alumni of colleges where they wanna apply and

[01:17:56] Prashant A Bhonsle: They can do, they can do, they can share their stories and they can share their learnings and so on

[01:18:00] Akshay Datt: interesting. Interesting, cool. And so what's like a broad 30,000 feet above the ground kind of a target in the next couple of years that you have in mind?

[01:18:09] Prashant A Bhonsle: Not next couple of years. I let give you a slightly longer version cause I'm building this company for the, if I may look, my, in my look Chettinad took about 12 to 14 years to build a billion dollar book, right? I think we will be able to do it in the 50, 60% of that time, yeah, so that's a broad range of where we can go, right?

[01:18:33] Akshay Datt: And how many student loan companies are like a billion dollar plus in terms of their book

[01:18:39] Prashant A Bhonsle: in India, private players, nobody except for Credit Suisse.

[01:18:42] Akshay Datt: Oh wow. Amazing. . Amazing. Amazing.