Loans – Dutch Uncles

‘Skin in the Game’ Rule: A Boon For Mutual Fund Investors

Aakash Sharma — Fri, 10 Sep 2021 08:35:11 +0000

Billionaire investor Warren Buffett has popularised one of the most fundamental phenomena in the mutual funds investing space – skin in the game. This financial idiom translates to the situation where prominent and high-ranking insiders of fund companies spend their money buying shares in the companies they run, usually based on publicly undisclosed tips.

Skin in the game is important to investors because it shows that if a company’s executives invest in more shares, it might be much more profitable than the on-the-face appearance.

The Securities and Exchange Commission of India – SEBI – recently released a framework to align the interests of asset management companies (AMCs) and investing partners (mutual fund owners, shareholders, etc.). Under the new guidelines, asset managers must invest 0.03% to 0.13% in each plan pool, depending on the individual plan’s level of risk.

‘‘

'Skin in the game' refers to executives, owners, or heads having a significant stake in the shares of the company they manage.

Under existing rules, finance companies had to add Rs. 50 lakh of their own money for each mutual fund scheme. Now, SEBI has removed the upper ceiling. Instead, it has factored in the fund size and risk in the investment to ensure more skin in the game.

SEBI has also announced that companies must pay a part of the compensation (20%) for critical employees (C-suite and stakeholding executives) in units of the scheme they manage directly or look over indirectly. The idea is that this will connect the central staff of the AMC with the interests of their scheme’s unitholders.

Positive impact on mutual fund investors

Mutual funds asset managers raise funds from many investors to invest in a pool of stocks, bonds and short-term loans. Investors buy shares of mutual funds, and each stock is essentially their part ownership in the fund and the income it generates.

The new SEBI rule is set to avoid activities where ‘fund insiders’ redeem a significant part just before the announcement of a mutual fund schemes’ closure (or failure). Thus, the regulator has included a lock-in period of three years, which means that investments cannot be sold or redeemed for three years.

This rule also applies to the fund manager’s liability and the concept of incentive pay. It will ensure that investment by fund houses in the schemes will align with the strategy’s riskiness, assets under management (AUM), and investor’s interests irrespective of their size.

As a mutual fund scheme size will grow, AMCs will have to invest more funds. This is an encouraging step and will help align the interests of AMCs with that of unitholders more closely.

What do the new rules say?

According to SEBI, AMCs must conduct a planned risk analysis based on the preceding month’s risk assessment. They have to use the risk-o-meter for it. The investment needs to be held until the end of the project period. Risk measurement by risk-o-meter provides a picture of the risk in a mutual fund corpus.

The risk-o-meter chart is prepared following the Association of Mutual Funds in India (AMFI) guidelines. This is similar to a speedometer, showing the five investment risk (danger) levels in different colours.

AMCs and fund groups have to ensure that the temporariness of the mark to market loss is certified by the statutory auditor. Mark to market loss is the value of an asset concerning its current market price. For example, stocks that an individual holds in their Demat account are marked to market every day. This move will chiefly increase the cost and benefit many mutual fund investors.

AMCs are not required to invest in exchange-traded funds (ETFs), Index Funds, Overnight Funds, Funds of Funds schemes, and closed-ended funds, where the subscription period has closed as on date of coming into force of Mutual Funds Amendment Regulations.

In effect, the ‘skin in the game’ rule is necessary to consider the larger investing ecosystem, which includes investors as significant stakeholders. It will also increase ownership and discipline among fund managers while improving personal accountability.

The post ‘Skin in the Game’ Rule: A Boon For Mutual Fund Investors appeared first on Dutch Uncles.

Don’t Get Confused Between Stakeholders And Shareholders

Aakash Sharma — Thu, 09 Sep 2021 05:35:08 +0000

Investments in listed companies are majorly made through the stock market. When you invest in a firm’s shares, you become a shareholder of the company and can participate in its functions in the same capacity. As you become shareholders, you also become stakeholders of that company.

Although their names seem similar, shareholders and stakeholders’ investments in a company are entirely different. Stakeholders are always the company’s shareholders, but shareholders are not always stakeholders.

Shareholders are part of a listed company through the ownership of shares. On the other hand, participants via a stakeholding relationship in a company are interested in the company’s performance for reasons other than financial performance or stock valuation. These reasons translate into a stakeholder’s more vital need for a company’s success over a longer term.

Stakeholders

For a company, its stakeholders can be the owners and shareholders as well as the employees of the company. Bondholders who own company-issued debt and customers who may rely on the company to provide a particular good or service are also considered stakeholders of any institution.

Although a shareholder may be the most significant type of a stakeholder because s/he is impacted directly by an organisation’s execution, different groups that are part of an organisation are also considered stakeholders.

‘‘

Shareholders are always stakeholders in a firm, but the vice-versa is not true - stakeholders are not always shareholders.

Shareholders

Shareholders of a company can be a person or an investment organisation that owns at least some part of the company’s shares. In this event, a company’s profits directly and primarily become the goal for shareholders. A shareholder only invests in a company with the hopes of increasing their portfolio value and wealth.

Shareholders generally do not concern themselves with the company’s secondary benefits and long-running values. They also have a significant influence and voting rights in the company. While shareholders own the company, they are not directly responsible for its debts.

Key Differences

Shareholders can sell a company’s shares and buy different ones in search of more profit as they do not have long binding interests in one company. On the other hand, the stakeholders have to stick with the business for a long time as they are part of it for more than just profits.

If a company suffers financial setbacks, the businesspeople in its supply chain might be hurt if the company no longer use their services and products. Likewise, the company’s employees, who are stakeholders and depend on it for wages, might end up suffering job losses in the event of bankruptcy.

Shareholders own shares and equity in a corporation. A stakeholder wants the company to thrive for reasons other than profits. Shareholders do not need the company’s perspective to succeed and can sell shares at any time. But a stakeholder joins a company for the long haul and needs to see the company prosper on all fronts.

The post Don’t Get Confused Between Stakeholders And Shareholders appeared first on Dutch Uncles.

Margin Pledge Rules By SEBI: What It Means For Retail Investors?

Aakash Sharma — Wed, 08 Sep 2021 08:35:11 +0000

The financial security of investors and market participants is essential for the expansion of activities and the entry of new investors. The Securities & Exchange Board of India’s new Stock Margin Pledge rule is a step in the right direction to ensure safety.

But first, let us understand margin pledging and then see how the new rules will impact retail investors.

What is Margin Pledging?

A margin pledging works just like any other mortgage programme. In margin pledging, you use your stocks assets as collateral to apply for a loan, similar to the mortgaging of real estate as collateral for a loan. Futures and options (F&O) traders often use Margin Pledging as collateral to obtain brokerage margin funds to invest in larger trades through initial investments.

Margin is a widely used tool in stock trading. Using this tool, investors can invest in commodities for a portion of their absolute value. By using margin pledging, you can save on investing real money by using an acceptable share price as collateral. This indicates that if you don’t reimburse the loss/depreciation, the broker holds the right to invoke and sell the shares of stock pledged for the margin for debt recovery.

‘‘

Margin Pledging, by definition, refers to the process of using your stock as collateral for a loan. If you cannot pay the margin, brokers liquidate the stocks in the margin account to collect their debt.

What will the new rules prevent?

Before the introduction of the new stock margin pledge rule, a broker was promised the client’s shares utilising a power of attorney (PoA) signed by the client on the broker’s account. The broker then placed these shares in the clearing corporation.

The PoA used by some brokers was problematic. Some brokers often misuse PoAs to transfer their clients’ shares to other clients or utilise their shares as collateral and borrow money for themselves.

The new stock pledge rule abolished the PoA system and has introduced a new equity guarantee method. The pledged shares and promised promotions shall always remain in the customer’s Demat account under the new rules. The client would need to authorise a pledge request in favour of his broker. If the depositor takes responsibility, the broker can pledge shares to the corporation for the stake.

What are the changes in margin pledging rules?

Investors and brokers can no longer use a Power of Attorney (PoA) as proof of title transfer. They can, however, use it to transfer shares to the stock market in cases of debt recovery. It can also be used to initiate orders on behalf of clients, meet margin requirements, or provide trading limits to clients.

The shares need to be compulsorily put in the investor’s account. The stock can be directly pledged to the concerned person/authority, ensuring that investors continue to receive all the company’s benefits in their dealings.

The broker must invoice investors in advance for any trading margins. Any client who fails to do so is subject to penalisation.

A penalty on a short collection of 20% upfront margin and any other additional margin plus MTM loss within two days is required in the cash segment.

Under the new standard, investors must pay a minimum margin of 20% to use the trading system to buy and sell stocks.

Unlike the previous system’s end-of-day module, investors will have to fulfil their margin duties at the start of the deal.

Any investor looking to avail margin shall create a margin pledge.

Impact on the stock market and retail investors

The financial share of the trading volume may decrease due to the new margin norms. This is because SEBI has almost finished excessive leverage trades and directed brokers to collect higher margins from investors.

In addition, depositors must wait T+2 days before pledging newly bought shares. But it will not have a significant influence on ultra-short-term trading investors. However, active traders can increase the value of their business via trading costs as they will have to provide higher margins now.

The post Margin Pledge Rules By SEBI: What It Means For Retail Investors? appeared first on Dutch Uncles.

Facebook’s Small Business Loans Initiative For India

Aakash Sharma — Sat, 21 Aug 2021 03:35:08 +0000

Facebook India has launched a new programme called ‘Small Business Loans Initiative’, which partners with Indifi online lending platform to promote small and medium-sized businesses (SMBs) on Facebook through independent lending partners. It is a pivotal move to help small businesses get credit quickly.

India is the first country where Facebook has launched the programme. It is open to companies registered in 200 cities and towns in India.

What is Facebook’s Small Business Loans Initiative?

Facebook’s Small Business Loans Initiative aims to give small businesses access to business loans and narrow the credit gap in the Indian SME sector. This programme allows SMEs to obtain loans between Rs. 5 to Rs. 50 lakh in 200 cities across India.

Getting a loan on time is especially difficult for small businesses that are just starting or have a bad credit history. Facebook’s strategic partnership with Indifi is critical in resolving that hurdle. Indifi is a major digital lending platform for providing business loans to Indian SMEs and Facebook’s partner in providing loans to small businesses. The initiative is set up with the potential to draw more partners.

‘‘

Facebook's Small Business Loans Initiative allows small businesses to apply for a loan through a direct online application and without collateral.

The move comes months after the government introduced new social media and OTT laws for all tech companies operating in India. With this, Facebook has shown its commitment to creating financial opportunities for Indian enterprises.

SMEs and SMBs working on using Facebook as a business platform

As per a survey done last year by Facebook in collaboration with the Organization for Economic Co-operation and Development (OECD) and the World Bank, in 2020, almost one-third of small and medium-sized businesses operating on Facebook cited cash flow as their most significant problem in working. The small business loans initiative is designed with these figures in view.

India has 1.5 million (15 lakh) SMB Facebook pages, and such businesses on Facebook have grown more than 70% year over year. Through Facebook’s collaboration with Indifi, small businesses that promote with Facebook can get credit loans at a predetermined interest rates of 17-20 per cent annually.

Government support

Facebook’s Small Business Loans Initiative was featured in the “Enabling MSME Growth through Financial Inclusion” online event hosted together by Facebook India and the Federation of Indian Chambers of Commerce and Industry (FICCI).

FICCI praised Facebook’s efforts to provide small, medium and micro businesses with the right opportunities, skills and solutions. The commerce body supports closer partnerships with the private sector to develop Indian MSMEs. It backs companies like Facebook that are helping small businesses and making it easier for them to get credit access.

How can businesses get benefits from this initiative?

Indifi will not charge small businesses enrolling in Facebook’s Small Business Loans Initiative a processing fee. Indifi will make the funds available within five business days of receiving the small business application and all completed paperwork.

Many small businesses find it challenging to get low-budget loans because they cannot convince lenders of their repaying credibility and business mettle. But small businesses can get loans between Rs. 5 lakh and Rs. 50 lakh through this programme. Small companies, wholly or partly owned by women, can also get a 0.2% discount on Indifi lending rates.

Moreover, Facebook will not be monetising this partnership and will help connect small businesses with Indifi. At this point, companies seeking aid do not need to advertise on Facebook, thus making the assistance smoothly available. This is undoubtedly a promising phenomenon for small and medium-sized enterprises and new entrepreneurs looking to fuel their ideas in the current economic climate.

The post Facebook’s Small Business Loans Initiative For India appeared first on Dutch Uncles.

Winning Strokes Of Vistaar Finance, An Aid To Indian SMEs

Aakash Sharma — Tue, 17 Aug 2021 05:35:07 +0000

Vistaar Finance is a deposit-free non-banking financial company (NBFC) that provides loans to small businesses. Vistaar serves its clients primarily through a network of more than 200 branches.

The company manages assets worth Rs. 2,100 crore, and its credit base includes public and private sector banks, mutual funds, international development agencies and large financial institutions.

Brahmanand Hegde and Ramakrishna Nishtala founded Vistaar Finance in 1991 with the vision of financing small business owners. Vistaar has developed several loan products for SMEs that often do not have the support of traditional financial systems due to different reasons.

‘‘

As a primary lender for small businesses, Vistaar Finance is a catalyst for underserved SMEs in India and is committed to promoting their financial inclusion and economic success.

Staff and corporate culture

Vistaar Finance has recently emerged as the best medium sized financial services company to work for in India in the 2021 AmbitionBox ranking. It is also ranked 13th on the list of the top 25 medium-sized companies in India.

According to company representatives, the recent award is a testament to Vistaar’s open culture, where teamwork, transparency and integrity are paramount. At Vistaar, employees have many opportunities to improve their light skills, such as communication or technical skills related to financial products.

Vistaar has had many success stories in its journey. The company has received funding from prominent investors, including Westbridge Capital, Saama Capital, Omidyar Network, and Elevar Equity.

Who does Vistaar Finance help?

Vistaar Finance’s target borrowers are categorised into several businesses such as general supply or grocery stores, household stores, hotels and bakeries, craft stores, clothing stores, and workshops, among others. Vistaar has a unique lending process with an in-depth analysis of each sector.

For loan applicants who have no proof of income, the company is developing innovative income verification options. It also continuously improves its products and credit practices based on changing customer needs and feedback. Business owners have used Vistaar’s credit facilities for various reasons such as working capital, home purchase, and home renovation.

Unique credit method

Since the early days of small business lending, Vistaar believed that each client group needed a unique approach. Start-ups and SMEs need to be able to get loans quickly and easily. Thus, the company is committed to serving its customers with a sustainable separation of partnerships that fasten the process.

Vistaar scrutinises the customer’s business and distinguishes the diagnostic features of their business. Its reference database is regularly maintained and updated. Transactions are continuously monitored and reviewed, and changes are made during credit checks.

Vistaar products are custom-built to suit a wide range of industries to maximise business growth for customers. Its offerings have been increasing in both ticket size and tenor. Vistaar offers different products for quick and easy business loans from Rs. 2 lakh up to Rs. 50 Lakhs.

Its essential loan products are Vistaar Saral Business Loan (VSBL), Vistaar Vyapar Mortgage Loan (VVML), and Vistaar Sampatti Loan (VSL).

Learnings for SMBs and the fintech industry

Loans to SMEs provide small businesses with a credit line to meet the needs of the company. Such loans can be used for working capital or long-term working needs.

As an NBFC, a company can provide regular loans and soft loans (small credit) to various SMEs and start-ups. A credit giving company can get more subsidies and government assistance if it helps small businesses function and expand. NBFCs can potentially replace financial market instruments and manage assets, such as investment portfolio management and equity investment portfolio.

While lending services are beneficial for SMEs and small business owners looking for sources of finance, companies operating in the financial sector and fintech can also reap huge benefits by providing support to small businesses. Entrepreneurs in the fintech and finance sectors can delve into this realm of proving funds and capture the alternative space of Venture Capital funds and traditional investors.

The post Winning Strokes Of Vistaar Finance, An Aid To Indian SMEs appeared first on Dutch Uncles.

Under Stimulus Package, MSME Entitled to Additional 20% Loans

Aakash Sharma — Sat, 03 Jul 2021 10:35:05 +0000

In the second phase of the government-backed stimulus package, the nation’s MSMEs will be granted loans under the credit scheme to survive in the pandemic-hit economy. Industry experts have welcomed the new package but have demanded more than just bank loans; they require direct benefits for increasing cash liquidity in the long term.

One of the features announced is the decision to increase the purview of Emergency Credit Line Guarantee Scheme (ECLGS) to Rs 4.5 lakh crore. The current cap of the ECLGS scheme, announced in May 2020 as part of the Atmanirbhar Bharat Abhiyan package, is Rs 3 lakh crore.

‘‘

The stimulus package, worth Rs 6.29 lakh crore in the form of a sovereign guarantee, aims to give relief to the industry's struggling segments from the second wave of the COVID-19 pandemic.

More Credit Guarantee on Loans for MSMEs

The package includes a credit guarantee for bank loans to microfinance institutions (MFIs), lending up to Rs 1.25 lakh to 25 lakhs to small borrowers. According to the latest available data, out of the Rs 3 lakh crore, banks have already sanctioned around Rs 2.7 lakh crore and disbursed around Rs 2.1 lakh crore under the ECLGS scheme.

Under the ECLGS program, MSMEs are entitled to an additional 20% loan backed by a sovereign (state) guarantee. The additional 20% loan limit in the current stimulus package is provided through ECGLS program loans. The credit limit was earlier extended to September 30, 2021. Now, the last date of disbursement under the scheme has been extended to 31 December.

Due to a long-term economic downturn and the financial distress caused by the pandemic, the Indian economy is at its lowest point in decades. The sovereign guarantee on credit loans to MSMEs is going to ease this distress to some extent.

Sovereign Guarantee

Sovereign Guarantee is an assurance in which the government promises to underwrite businesses’ losses in the undertaking as a guarantor due to the disastrous consequences of certain events. The disastrous event, in this case, is the pandemic which has resulted in a sharp drop in companies’ creditworthiness.

What is in the Stimulus Package?

As part of the loan guarantee, banks will provide loans to MFIs at reasonable interest rates and lenders will have easy access to credit to give to MSMEs. The guarantee on loans will be provided to Scheduled Commercial Banks, new (or existing) NBFC-MFIs, or Micro Finance Institutions (MFIs), for on-lending up to Rs 1.25 lakh to approximately 25 lakh small borrowers.

The scheme will have a focus on new lending, not repayment of old loans. All borrowers (including defaulters up to 89 days) will be eligible for the stimulus package’s benefits. Affiliated Member Lending Institutions (MLI) will provide guarantee cover for funding to MFIs/NBFC-MFIs until 31 March 2022 or until guarantees for Rs 7,500 crore are issued, whichever is earlier.

How will the SME and MSME segment benefit from the stimulus package?

Primarily, India’s small business sector, which contributes the most to the nation’s economy, will get a lease on their business life due to increased financial credit and guaranteed low interest-rate security. The new stimulus package will provide the necessary credit to MSMEs and businesses in the lower rung of the economy to perform important functions like covering operating costs to keep the business going.

In addition, loans will be granted to all trusts or registered companies belonging to the MSME category. The application for the ECLGS Scheme, under which 20 per cent of additional loans can be taken, is a seemingly straightforward process. The borrower must register under GST and have an SMA-2 and NPA status. There is no fee for processing the application.

Experts have said that while the recently announced stimulus package is targeted at the areas which are the most affected by the pandemic, it relies more on loans than on direct incentives. Credit guarantee schemes have not guaranteed revival in the past (as recently as 2020) – the current economic downturn is apparent in the low GDP, high inflation and unemployment.

Generating new demand is the most effective way to stimulate the economy, and that requires an increase in consumption. To increase consumption, the government should put money directly in the hands of the people. Sectors need liquid financial support immediately, not credit expansion. It is only when people have cash in hand that they will spend it on commodities, which will increase MSMEs’ business.

The post Under Stimulus Package, MSME Entitled to Additional 20% Loans appeared first on Dutch Uncles.

Policybazaar: Upending the Complex Indian Insurance Market with Tech

Aviral Srivastava — Tue, 15 Jun 2021 05:05:04 +0000

In today’s world, people tend to take steps in order to mitigate their losses and encourage their financial stability by binding themselves into a contract which gives them financial flexibility and encourages a better flow of trade (for business houses) even when they suffer an economic loss. This is where the insurance industry comes into motion and where Policybazaar makes its mark.

The uncertainty of events in our lives is the reason why insurance policies play a major role in securing a better future for oneself or our loved ones. A person can incur the risk of losses of life, health, asset, property, etc. It isn’t always possible to prevent the loss of any commodity, the financial sector provides us with this product called “insurance”. This helps in promoting economic growth, generation of long term financial resources, providing support in medical emergencies as well as providing safety to the business from extreme-end losses.

What is Policybazaar?

Policybazaar is an Indian insurance aggregator based in Gurgaon, India. This company helps a person compare financial services from different insurance companies on a single digital platform making it easier for people to choose the most convenient and affordable option. The company was founded in June, 2008 by Yashish Dahiya, Alok Bansal and Avaneesh Nirjar.

The company is now worth over $2.4 billion making it one of the most successful Fintech companies in the country. In early 2020, Yashish Dahiya told Bloomberg that Policybazaar was set to make its Stock Market Debut as India’s first Unicorn.

The enterprise has over 10,000 employees working from its headquarters in Gurgaon.
Policybazaar, now works as an insurance selling operator after switching from a policy comparison website. This move was a turning point in the company’s business run as they discovered multiple sources of income leading them to success.

‘‘

It isn't always possible to prevent the loss of any commodity, the financial sector provides us with this product called "insurance".

Policybazaar: Covering Milestones

In the mid 2000s, the Indian insurance industry was still growing and didn’t have a lot of impact on the financial sector. Policies and insurances were sold through agents via one-to-one communication. The industry back then didn’t have a lot of transparency and people were still hesitant to buy off even general policies from an agent.

But with the change of time, this perspective also changed. With more and more companies joining the insurance industry, the competition rose and trust was built between people because of the same. In 2008, when the three entrepreneurs came up with Policybazaar, it was merely an information portal which used to help people know more about different kinds of insurance policies and its benefits.

This process involved comparing insurance prices of different insurance companies, explaining about policy-programs and other useful information regarding the same. Policybazaar had a long Journey from being an information provider to a full-time policy seller agency. The website expanded enormously and became a premium hub for insurance policies.

In 2015, the company launched its own Android and IOS application which helped them grow on a bigger scale. The company made its services available to more and more consumers and sold more and more policies.

The Success Story of Policybazaar

Since its inception, Policybazaar has managed to make some good acquaintances in the financial industry. Policybazaar has managed to raise $US366 millions since 2008 within 7 rounds of funding. Major companies like Info-Edge, Intel Capital, Inventus Capital Partners, Premji Investments (Wipro), and Tokyo based Softbank:s Group of vision funds have invested in Policybazaar making it one of the most reliable Fintech companies in the country.

The owners proposed a good business model to every group of investors and were quite commendable with it. The business model of the company would be explained in the next section.

Policybazaar has also been awarded quite a lot of trophies for its consistent and trustworthy service that they’ve been providing to their customers. Some of the major awards won by the enterprise are IAMAI Indian Digital Awards for best financial website 2015, BAM award 2015, Best Marketing & PR Campaigns – India PR & Communications Awards 2018, Best Content in Online PR Campaign – Drivers of Digital – Inkspell Awards 2018, Best Consumer Awareness Campaign – Silver -Economic Times Brand Equity Kaleido Award 2019, Best bank in Fintech – Financial Express Best Bank 2019, Leading Fintech Innovator in India -KPMG-H2 Ventures Report and many more adding on to the list.

The company has proved its worth as they claim to process about 25 per cent of India’s total life insurances and about 7 per cent of the nation’s health cover. The company provides its consumers with more than 250 insurance plans and operates around 50 insurance brands on its platform.

The Genius Business Model Powering Policybazaar

Policybazaar being an aggregator of insurance policies which means that it would list out all the insurance products relevant to the search made by the consumer. They would redirect the consumer to the insurer’s platform for selling the required policy and therefore, earn commission based on the consumer traffic brought by Policybazaar on the insurer’s website. This process can only be initiated once the company has been approved of a IRDA license. Companies which have an IRDA license can directly sell insurance policies without the help of any mediator like Policybazaar. In such a case, Policybazaar sells information and leads of their customers to the other insurance companies for expanding their customer range. This is just one way of earning money.

The company has connections with various and different kinds of insurance operating companies. This network helps Policybazaar compare and analyse the price, benefit, insurance cover and reliability of different insurance plans. This information is provided to the customers in a more organised manner in order to research and buy. Policybazaar is in a tie up with companies providing car insurance, life insurance, corporate insurance, health insurance and travel insurance. This opens up a lot of options for a customer within the same platform.

One of the most important and toughest parts of the job is to convince people to buy insurance. With a lot of competition being around, this task was made nothing but more complex. Selling off insurance to an optimist might be seen as a hurdle because of the long term investment. Policybazaar made sure they maintained a reputable goodwill in the market and were very transparent with their work.

How Policybazaar Stared down the Competition

The major competition faced by Policybazaar is from Fintech companies like Bankbazaar, Acko, Coverfox, Easypolicy, etc. The insurance industry has grown to be very competitive and hard to survive with various other companies hanging around. The company had made their business model featuring the cost and services of the policies available to its customers increasing the company’s reliability. The insurance companies have started to adapt to the needs of their customers and have attempted to reshape the policies and their business models according to their target customers. This has opened up a lot of options for a person looking for a good insurance program.

The company has stayed afloat in a very competitive Fintech industry for more than a decade now. The company deals with millions of customers every year where they have to convince more people everyday to buy off insurance policies from their portal. In a country like ours, people tend to do a lot of research and analysis before buying an insurance policy. Policybazaar already provides the customers with such analysis making it easier for the customer to choose any policy from the given insurers.

There’s a huge traffic of policy-buyers everyday on the Policybazaar website already and now, the main focus of the traffic handlers is to increase the positive and more active network by encouraging people to buy policies or do any other kind of activity on the portal. The company is responsible for the privacy of the information shared by any customer as well as the legitimacy of information provided to the customers.

‘‘

Policybazaar is one of the clutch Fintech startups of the country looking forward to flexing the tightly regulated financial services segment enjoyed by state-held and bank-backed insurers.

The Road Ahead

India’s fast moving tech-industry has attracted numerous investors with huge investing capabilities. This is a great opportunity for well-established businesses to expand their wealth as well as reach. Subsequently, even Policybazaar announced that the company was going to go public and would be a part of the stock market from 2021.

The Soft-bank backed company would be filing for an IPO (initial public offering) that would raise upto $500 million for the insurance company. This would raise the value of Policybazaar to an estimate of $3.5 billion and would consist of new stocks of already existing or familiar shareholders.

Policybazaar is yet to announce their final decision regarding their IPO draft and is set to be India’s first mega-start up to go public this year. Yash Dahiya, Co-founder of the company, told Bloomberg last year that the company would mostly go public in 2021. The plan is to secure $250 million in a round of financing at a $2 billion valuation before September. The reports emerged stating that the company is enlisting themselves in the Mumbai IPO but Mr. Dahiya told Bloomberg that they were also looking for dual listings if there are any amends in the rules.

Policybazaar is one of the clutch Fintech startups of the country looking forward to flexing the tightly regulated financial services segment enjoyed by state-held and bank-backed insurers. The idea is to make these policies available to the middle class uninsured and under-insured Indians. The target customers can still be expanded in a country like India with most Middle classed men and women would not have insurance. The company has made goodwill in the market and is now considered as one of the best insurance aggregator companies in the country. With the IPO registration, the company obviously becomes public and the profit margin of the same has expanded indefinitely. Through this, the insurance company can support the incoming policyholders while still working as an aggregator.

Amidst all of this, the mobile app of Policybazaar plays a criminally underrated role. The app service launched by the company back in 2015 works for both Android as well IOS users and hence, increased the number of customers. This also made buying insurance online much easier and reliable. In 2018, Policybazaar adopted Amazon Polly and developed an AI system in order to improve their customer satisfaction. This proved to be very helpful as Policybazaar received a lot of complaints regarding excessive phone calls to their consumers.

Since 2008, the company has been a major part of the Fintech industry as an insurance aggregator and later witnessed a massive turnover. This just proves how deep the Fintech industry is in terms of the money involved.

The company still hasn’t reduced the intensity of the amount of work done and has already listed out targets for the upcoming year. These involve expanding their customer base to 1 crore, underwriting premium worth Rs. 10,000 crores, increasing revenue to Rs. 1500 crores, expanding across the globe and finally launching its IPO soon. All of these targets are to be achieved before the end of 2021.

The post Policybazaar: Upending the Complex Indian Insurance Market with Tech appeared first on Dutch Uncles.

Essential Steps for Getting a Small Business Loan in India

Aakash Sharma — Tue, 09 Feb 2021 07:11:32 +0000

One of the biggest hurdles that needs to be overcome when starting a new business is capital requirements and business loans are one of the oldest ways in the book to get money to create a new business. There are different types of business loans, and a relevant loan can be researched and requested depending on the needs of your business’s nature.

Some popular business loan options include working capital loans, start-up loans, prepaid loans, etc. The first step is to determine how much money you need and what is it required for. This goes into the business plan, which is evaluated during the loan approval process.

There are many ways to raise capital, of which the most prominent are:

Bank loans (many offer small business loans),

Going to non-bank financial institutions (NBFCs) for funds,

Methods such as crowdfunding, and

Investment by angel investors and venture capital agencies.

Eligibility for Startup Business Loan

A business loan can be applied for with a public or private bank, or non-banking finance company. But there are some basic licensing requirements, most common of which are:

A business should have been around for over six months,

Its minimum turnover should be ₹ 90,000 or more in the last three months,

It should not be blacklisted for raising funds, and

It should not be a trust, NGO or charity.

For a new business idea in the early stages, the best way to raise funds is through a NBFC. Most banks prefer to lend to existing small businesses instead of a new start-up. Banks want to bury the risk, and because of this, officers can complicate the documentation and evaluation process over time. NBFCs, on the other hand, are more open to investing in newer business ideas and support budding businesses than banks.

‘‘

You need to state the loan's requirement clearly. Many programmes and offerings which governments and its agencies manage help businesses to grow based on their needs and pitch.

Startup Business Loan Interest Rate

Interest rates are one of the main problems for small business owners who sign up for business loans. Higher interest rates can increase the total amount owed and repaid in each EMI. Because small businesses are generally run with very little or no profits, business debt rates have to be a precautionary measure. So, start-ups need to find a plan, either from private finance or the government.

Steps required in obtaining a business loan

Stating a clear need for the loan

You need to state the loan’s requirement clearly. Many programmes and offerings which governments and its agencies manage help businesses to grow based on their needs and pitch.

Creating a business plan

A good business plan must include corporate goals, previous work details and project information.

Document’s organization

As the most crucial step, your documents should include financial transactions, taxes, licenses and more complex issues for getting funds and loans approved.

Required Important Documents

The following documents and their details need to be presented before the loan sanctioning process is successful:

Company’s joint certificate or joint deed,

Business Account Bank Report,

Financial reports for the last three years,

Profit and loss accounts, audited balance sheets, and audit reports,

Statutory regulatory reports such as income tax refund,

GST refund, VAT refund (for previous business),

PAN Business Card and other essential operations, and

Financial forecasts for the future.

The post Essential Steps for Getting a Small Business Loan in India appeared first on Dutch Uncles.