'The Biggest Challenge Is To Resist The Temptation To Think Short Term'

With a client base spread across 253 cities in India, Credit Sudhaar is a unique credit and finance platform for consumers who have made credit mistakes in the past - and hence have poor credit scores. Headquartered in Mumbai, Credit Sudhaar has offices in Bangalore and Kolkata and has employee strength of 200 people. Arun Ramamurthy, the company's founding Director, spoke to Aniruddha Bose (editorial consultant, BW Businessworld) on the company's USP, business model and future plans for growth.

Please tell us a little bit about your professional experiences prior to launching Credit Sudhaar.
I am an ex-banker with 12 years of experience in retail banking. Prior to setting up Credit Sudhaar, I was the business head for unsecured loans at Deutsche Bank, where I was instrumental in building up a 2000 crore loan book from scratch. Prior to Deutsche Bank, I was with Citibank in various roles across loans, credit cards and bancassurance.

What was your inspiration behind launching Credit Sudhaar six years ago? What specific gap is your business model aiming to fill? Have you fulfilled your short term mission?
Credit Sudhaar was officially launched in 2013. The gap, at that time (which continues to exist today) is the low levels of consumer credit awareness in India. While there are 400 mn people on the credit bureau, only a fraction of them know about concepts such as credit reports and scores. Such lack of awareness leads to financial illiteracy which leads to NPAs in the consumer credit sector. Over the last few years, our organisation has strived to provide credit reports free of cost to clients. We have also written a book ("Unlock the power of Your Credit Score") and conducted several seminars to propagate credit awareness in India.

What is Credit Sudhaar's revenue model? Has it undergone any material changes in the past six years as your business has evolved and you've undoubtedly learned many new lessons?
Credit Sudhaar Services provides financial and credit counselling to clients who have poor credit. This is done by using proprietary analytical tools administered by trained and certified counsellors who handhold clients through the various issues that they may face.

Credit Sudhaar Finance is an NBFC which lends to people who have made credit mistakes in the past. It uses proprietary scorecards and underwriting techniques to lend to people who are shunned by the system but in our opinion should find inclusion in the financial system.

Has the company raised capital or diluted equity towards strategic partners since its launch? Do you have plans to raise capital, or is organic growth your preferred course of action?
The growth till date has been largely organic in nature.

I have no doubt that like all other entrepreneurs, you've faced many challenges in the past six years - the so called "baptism by fire"! Please tell us about the biggest one you've faced to date, and how you overcame it.
The biggest challenge for a start-up is to resist the temptation to think short term and focus on massive growth even at the cost of negative unit economics. Such thinking imposes liquidity constraints and leads to issues on other parameters whether it is quality, customer service or people. We have been fortunate enough to stay away from this bandwagon and have focused on unit level economics enabling us to balance growth with profitability.

Has Credit Sudhaar broken even as yet?
The company has started to break even on a monthly operating level basis.

What are the entry barriers to your business model? Is there anything that stops larger, more well-endowed players from entering the same space and competing?
Our methods use proprietary analytical techniques which have been developed using the consumer data and our experiences over the last decade. The more data we collect, the better our algorithm becomes. This is our single biggest differentiator and also forms the best defensive moat for our business.

What are your growth plans for the next half decade - are you a people and capital intensive business, and would you call yourself scalable?
We are focused on using technology to lower costs whether these are operating costs or credit costs. This makes our business highly scalable given the large market size in India. We are confident that capital will always be available for such scalable businesses.