Sub-K to scale up operations, income manyfold

Emerging as a Rs 500-crore enterprise from the level of Rs 2 crore in a span of five years is an ambitious target for any company. But that is what Sub-K iTransactions Limited, a mobile banking and other services enabling company of the Hyderabad-based Basix Group, hopes to achieve.

In 2010-11, Sub-K’s topline stood at Rs 2 crore and the bottom line was negative. This year, the company expects to post a turnover of Rs 40 crore and achieve break-even. “ We should be a Rs 500-crore company with about 15 million customers across India 4-5 years down the line,” Sub-K managing director and chief executive officer, Amit Mehta, told Business Standard.

“We have now a proven model, which can be scaled up easily,” Mehta said explaining how the company would be able to increase its income several folds in so short a time.

Sub-K, which received the first round of $1 million equity from Dell Foundation last year, is now in the process of raising additional grant or equity of $3 million this year from a non-profit organisation. “Negotiations are currently in progress and there are very positive signals,” Mehta said.

This apart, he said, the company was in the process of adding seven more banks to its existing list of six in the next three months. These include a leading private sector bank. Sub-K is also planning to extend its operations to “all the cities in the country” by the end of this year.

Sub-K, which means less than 1,000, helps people access services within distances of 1,000 metres, with transaction values under Rs 1,000 and by incurring transaction fees less than 1,000 paise through outlets that typically serve 1,000 customers in a locality.

The company works on appointing service providers and banks at one end and Basic Convenience Outlets (BCOs), which are mostly kirana shops, at the other to provide customers digitised services through a mobile technology-based platform. These services include banking operations, NREGA and other government payments, money transfers, utility payments and prepaid mobile top-ups. The company plans to provide more services in future.

Incorporated in August 2010, Sub-K had entered into a tie-up with Syndicate Bank and started its operations in December 2010 on a pilot basis in 111 villages in Andhra Pradesh. Three months later in March 2011, it added to its list Ratnakar Bank and extended its operations to an additional 180 villages in Maharashtra and Karnataka.

By the end of first year in August 2011, Sub-K had set up 383 BCOs servicing over 75,000 customers in seven districts of four states. Today, it has a tie-up with six banks servicing over 175,000 customers through 800 BCOs spread over 15 states. Besides, Syndicate and Ratnakar, it added to its list Axis, Citi, ING Vysya and Oxigen banks.

According to Mehta, Sub-K has been successful in bringing down the per transaction cost to Rs 1-2 as against the cost of Rs 36-37 in traditional banking in rural areas, Rs 15-20 in urban areas and Rs 3-7 in the case of ATMs. This has been possible through appointment of a local retailer (BPO), making all transactions online by linking them to the core banking system and doing away with the earlier system of employees handling cash. Now, the cash is handled by the retailer.

Sub-K provides a micro ATM kit to the retailer comprising a phone, printer and a sensor that costs Rs 15,000. The retailer should buy this either through his own money and or by taking a loan, which would be arranged. Besides, he has to invest an additional Rs 15,000 as security deposit. The company charges the bank concerned Re 1 per transaction of which 60 paise goes to retailer and the remaining amount to Sub-K.

There will be only one BCO in a village, which has a population of around 1,000. If the population is more, additional BCOs will be set up in proportion to its population. No transaction will be more than Rs 1,000 and no customer will be allowed to make more than two transactions a day. Mehta said the BCOs were earning Rs 600-900 a month on average. The company was striving to ensure that each BCO were earning Rs 600-900 a month on average. The company is striving to ensure that each BCO earned Rs 1,500-2,000 a month.