JSW Group to foray into lending with Rs 400 cr investment in captive NBFC

The Sajjan Jindal-led JSW Group is foraying into the lending space with an investment of up to Rs 400 crore in a captive non-bank lender housed in its e-commerce arm, a senior official has said.

The non-bank finance company (NBFC) will be a subsidiary of the JSW One Platforms (JSWOP) and will be doing purchase finance for buyers on the newly started e-commerce arm, Gaurav Sachdeva, the chief executive of JSWOP, told PTI in a recent interaction.

Eventually, the NBFC can help out other companies in group like cements, steel or paints by offering financing solutions, Sachdeva, who has worked in the financial services space earlier, said.

Sachdeva said at present, the micro, small and medium enterprises which form JSWOP's clientele are not served by the banking sector as well as they should be, and hence, the USD 22 billion JSW Group felt a need to enter the space.

He said JSWOP will invest around Rs 350-400 crore in the NBFC over the next two years, and the same is a part of an overall USD 4,000 crore capital investment plan outlined for the e-commerce business by FY27.

It will only be e-commerce customers who will get the financing. We are building a captive (NBFC)..its part of the e-commerce business, it is not an independent go to market company, Sachdeva said.

The group has already incorporated the financial services company within JSWOP and christened it as JSW One Finance Ltd, he said, adding that the company will approach the RBI for a license to work as a non-deposit taking NBFC in the last quarter of FY23, and hopes to get the regulatory nod in 7-9 months after that.

On the credit front, if we have to extend it to the JSW Group at some point of time, we will be (open). It will require more capital, he said, adding that this is the maiden foray into the financial services space for the group.

It can be noted that practically every big conglomerate of JSW Group's size has an NBFC-arm which serves the financing requirements of the supply chains served by the individual companies across sectors, while in many of the cases, such NBFCs have started to independently go out into the market as well for non-captive business.

When asked about the JSW group's decision to house the business in a new company like JSWOP and not take it up at the group level or to some other bigger company, Sachdeva said, It is the digital capability that the platform provides, it is the data that the platform is capturing that's what is leading the (JSW) group to think that it is possible to do it in this way. That's been the reason for housing all these businesses under JSW One, he said.

Sachdeva said the NBFC will price risk correctly, but will not chase yields while distributing the short period (60-90 days) purchase finance loans because helping increase the throughput of the overall e-commerce business is the primary aim.

When asked about the threat of non-performing assets from financing small businesses in the infrastructure space, Sachdeva exuded confidence that its understanding of a customer, data processing, clarity on movement of goods in the entire value chain will help it.

The NBFC will have up to 200 people working for it and already efforts are on to build the team and also the tech stack which will be the core of the operations, Sachdeva said.

JSWOP will be investing up to Rs 200 crore in the logistics side, Sachdeva said, adding that the other pillar of service centres will also require investments in real estate and machinery but declined to share the number.

The company is presently running at an annual rate of Rs 1,400 crore in gross market value (GMV) of goods sold on the platform, which will go to Rs 3,000 crore by March 2023, Sachdeva said.

In the next fiscal, the company aims to have a GMV of USD 1 billion on the platform, after which it will start scouting for private equity investors, Sachdeva said, adding that at present, JSWOP is funded by the group's cement, steel and paints arms.

It aims to break even and start registering profits by FY27, at which point of time it is targeting to have a GMV of USD 5 billion on the platform, Sachdeva said.

Other key companies in the infrastructure space, especially Birlas and L&T have plans or are already operating dedicated e-commerce platforms. Sachdeva said JSWOP's aim is not to widen the profit margins but to increase the overall throughput for companies and added that it will never disrupt the existing distribution channels for each of the companies.

At present, about 80 per cent of the overall sales on the platform are ones related to the group's products, he said, adding that a significant part of the sales are through distributors who are on the platform.

JSWOP has been serving B2B customers in Tamil Nadu, Maharashtra, Karnataka and Telangana right now, and will be going into Gujarat and the national Capital Region in the second half of the fiscal, he said.