Episode 207 / March 6, 2023

Understanding the trillion-dollar lending market in India with Rangarajan Krishnan, CEO, Five-Star Business Finance

01 hr 00 min

Episode 207 / March 6, 2023

Understanding the trillion-dollar lending market in India with Rangarajan Krishnan, CEO, Five-Star Business Finance

01 hr 00 min
Listen on

Imagine you’re part of an NBFC, how would you lend to a person running a Kirana business? Without any proper credit score, current account or other standard checks.

Finding it difficult to evaluate the credit worthiness of the shop owner. Right? In the age of the internet, UPI, net banking, Jan Dhan Bank account and almost all transaction-related data available with transparency, it seems possible.

Now imagine dealing with the same issue, back in 1984. Seems impossible right?

Well, that’s when Five Star Business Finance, ventured into small business financing.

In this episode, we have with us, Rangarajan Krishnan, CEO, Five Star Business Finance.

Dive into this episode as Rangarajan shares the journey of Five Star, their experience of going IPO recently, how RBI regulates NBFCs, what differentiates them from other NBFCs, Banks Fintech, and more.

This episode is a must-listen for entrepreneurs, small business owners, and anyone looking to learn more about the working, valuation, and scaling of NBFCs in India.

Notes –

00:00 – Highlights of the conversation

01:28 – Intro to Rangarajan & Five Star Business Finance

02:38 – Valuation for NBFCs while going IPO

03:14 – Their IPO journey over three phases

10:29 – Private round valuation Pre-IPO

13:33 – History and background of Five Star

22:03 – RBI’s regulations around deposit-taking NBFCs

23:26 – How does the lending market in India looks like?

26:29 – The simplest way to define a customer of Five Star

31:51 – Branch presence across major geographies in India

37:10 – RBI scale-based regulations for 10,000+ NBFCs

39:45 – What differentiates them from other NBFCs?

42:41 – Do they aspire to be amongst the Top 10-15 NBFCs in the next 2-3 years?

44:11 – Prerequisites from RBI for starting an NBFC

46:16 – Do they want to become a Fintech eventually?

49:20 – Being a CEO and a Non-founder

51:39 – His interaction while joining Five Star

56:53 – Managing his & promotor’s responsibilities

57:46 – Things he has changed & retained in the company in the last 7+ years

Read the transcript here:

Rangarajan 0:00

Around that time he did that in Chennai, he did three cycles of experiment of actually giving his own money, making sure that the money is coming back.


Siddhartha 0:10

And what was the order book like, which he was lending?


Rangarajan 0:11

I think in 2006 it was pretty much five, six crores. By 2010 we had become about 25 Crores, because it started very, very small. So from 2010 We were at 25 crore books and every two years, we were doubling the book. So in 2012 we became 50 crores, in 2014 we became 100 Crores. So by 2014, we had about 30 branches across Tamil Nadu. The simplest way in which we define a customer of Five Star is anybody without whom a common man cannot lead a smooth life. Our hypothesis in this is that if he has cash flows and if the cash flows are real, the cash flows have to get reflected somewhere. There are primarily two things in which everybody would like to reflect their cash. I mean, fundamental to human psychology. Either you reflect on a better living style or you reflect on the asset creation for you and your family, we check for evidence for both of this.


So the southern part is the bread and butter of what we do. Even today, I would say about 93% of our book is in the southern part of India, but we started expanding slowly into the central Indian geographies. So we are not impatient. I think when we put up a branch in any new state, we will at least wait for 24 months. The first 24 months is a learning period for us with no targets.


Siddhartha 1:27

Hi, this is Siddhartha Ahluwalia. Welcome to the 100x Entrepreneur Podcast. Today I have with me, Rangarajan Krishnan, CEO of Five Star Finance, Five Star finance is one of the top 100 NBFCs in India, non banking financial institutions which are available in India to lending to common people who are starting up on their own. SMEs, SMBs Five star recently went IPO, they were at around 1200 crore rupees revenue 6000 Crore plus assets in under management. And I believe your IPO did around two to $3 billion in valuation.


Rangarajan 2:01

That’s right. Firstly, Siddhartha thank you for having me here. I’ve heard quite a few of your podcasts. They are very interesting. And I didn’t realize the magnitude of what you do until I saw it live here. But I think kudos to your efforts in sort of making sure that the right voice has reached the market. Thank you for having me. So we did an IPO. So in November, we went out with an IPO. So that was roughly a valuation of a little less than about $2 billion.


Siddhartha 2:30

But I think right now your valuation must be higher.


Rangarajan 2:33

We priced each stock about 25% post the IPO. So we are well over $2 billion at this point of time.


Siddhartha 2:41

So right now you are at exactly 1200 crores revenue. And you price the IPO between like 14,000 crores, I would assume?


Rangarajan 2:50

Yes, a little less than 14,000 crores is what we priced. So what’s more relevant in our metrics is what’s in the book. So the book is defined as the net worth, which is equity plus retained profits. And what’s the multiple in the book that you’re going with? So, that is where generally the NBFCs or the banking sectors get priced in. And we had gone with the IPO pricing based on that, as compared with where the competition is.


Siddhartha 3:15

Got it. So I want to dive deep into the IPO first and then into the journey of Five star finance. So many startup IPOs we have seen, I’ll not take names, but are 70 to 80% down from the peak valuations, which were between 5 to 25 billion in their number. And they had much less revenues than you had; they were not profitable. You are doing revenues of 1200 crores, 450 crores of profit, scaled 3x in the last three years, I checked your DRHP, in 2019 you guys were at around 400 crores in revenue and less than 100 CR in profit. You scaled pretty well. How did you price the IPO? You could have asked for a $10 billion price.


Rangarajan 4:00

I think this is a very nuanced question. I probably wanted to cover it as the entire IPO journey.


Siddhartha 4:05

Take us through the entire IPO journey and then finally answer that question.


Rangarajan 4:09

So in Tamil there is a saying that a man has to get married, and he has to build a house. These two are the most important milestones that a man does in his life, and he will be a different man at the end of this experience. I want to add one more thing to it, which is to do an IPO. It’s a very, very significant event. Not too many people get an opportunity to be part of that in their lifetime. I’m really thrilled and happy that I got an experience here. One of the common questions that get asked in an IPO is how much time does it take to do an IPO? And the most common answer that you might hear is that it takes anywhere between six to nine months. I think the answer is wrong. It really depends on whom you are asking this question from.


Our IPO journey, I want to divide it into three phases, the first phase starts, which is completely internal to the company. So from the time that you start thinking that potentially you want to do an IPO, you will have to work hard for at least the next two years, I would assume, where you’re getting a series of things right, you’re ensuring that your business model is right, you’re ensuring that it’s a predictable business model, it is scaled up, you’re not going to give shocks to the market, one quarter or the next quarter down, then there is a lot of team building activities that you’ll have to do, you will have to cover a whole host of steps with respect to governance with respect to compliances, with respect to disclosures that you will have to do.


So it’s a pretty steep journey. In that phase, what really helps is what is the quality of the team that you have internally. Because if you have a good quality team, the kind of debates, the discussions that you have with each person’s diverse views that he brings to the table that enriches this journey, and makes you, I would say, watertight, when it comes to really taking the plunge just before the IPO. This preparation for an IPO, you’re not calling it a direct preparation to the external world, but this mental preparation, or the internal evolution of a company is anywhere at least between six to eight quarters. This is phase one, phase two is a process part. Once you actually formalize that this is what I would like to do an IPO with. This is the broad structure and the combination. You decide to hire bankers, lawyers, all the external agencies, advisors who come as part of your IPO. This takes about six to nine months.


I think if your ship is tight, your houses clean, you will be able to give them all that is required. But each of the people who are coming in as part of this phase, they’re all specialists, they have done hundreds of IPOs in their lives. So as long as you’re able to supply them with the right information, they will take you through this process. This is about six to nine months. I think of the three phases that I’m going to enlist. This is probably the easiest part. The last part, which in my mind, I would like to call it as consensus building, is the toughest part in an IPO. Because unlike private rounds, in a private round, two parties decide on how good is your business model? What’s the valuation? What is it that you would like to go ahead with? If you have an agreement, you shake hands and move on, but an IPO is unlike private round, it’s a completely at the other end of the spectrum, every company believes it’s so unique, and there are no comparables, they are the first in the market, they should be compared to the best of the needs probably, somewhere on the other side of the globe. But Public Market sort of cuts all that bullshit, they will want to understand this in a sustainable long term, simple terms to be compared with and to be understood with, and you’re not dealing with a single investor, IPO can never be successful with one single investor or one single anchor.


So you will pretty much meet, anywhere between, I would say 150-200 investors during this journey. And in each of this, you will probably not get more than 60 minutes time with most of the investors. So in under 60 minutes, right from introducing your company to actually helping him build a thesis consensus making work a little more, to create the interest to understand more, and ultimately get them on the common platform with respect to predicting the business model agreeing on the valuation, agreeing on the time and markets supporting you. This is the phase that I would say is 90%. Not in our hands, you do your best. And hopefully, if your preparation has been really good over the last couple of two, three years ahead of the IPO, your journey can be a little smoother. But this last part is really the toughest.


So the question that you asked, which is around valuation, really comes towards the last part. I think every company till you reach this part, I think you will have a lot of internal benchmarks on what your valuation should be. But I think when you go to the market, when the rubber hits the road, you hear multiple perspectives about what’s good, what’s not good. Who are the real competitors, who are the real comparables that the market is attributing your company to. More importantly, how is the market itself doing at that point of time, for no fault of yours, let’s say that the previous few IPOs have not done well and you decide to do an IPO, you will have to put a pound of flesh on the table. Because the same investors are coming in. So it’s a combination of all this where you really price it in. So I think that the price in which you decide to ultimately go to the market is absolutely market and consensus driven, it’s not with you. You will have some benchmarks below a particular threshold. You might not want to do an IPO but I will say it’s largely market driven.


Nansi 9:20

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Siddhartha 9:51

How did the final number of the valuation of 13,000 to 14,000 crore rupees get in?


Rangarajan 9:57

I mean technically it was decided by the first few anchors who actually put the price on the table, it’s a consensus event at the end of the day, the anchor book, that sort of decides the pace and the participation levels of an IPO. So it’s very critical that you have the right anchors for the book. And those anchors, based on all the factors that I just listed out, finally decide to put a price. Like I said, it’s a combination, beyond a threshold, the anchors are not interested, below the threshold, the company is not interested. So somewhere you find the balance at that level.


Siddhartha 10:28

And what was a private round valuation that you raised pre IPO?


Rangarajan 10:33

See the last round that we did just ahead of the IPO in early 2021, that was when one of our early investors exited completely. So Morgan Stanley invested in us in 2016. And when they decided to exit we had Sequoia which led the round. So which sort of doubled up its investment in us Sequoia came in 2017, they participated again in 2018. So they doubled up their investment in 2021, when Morgan Stanley exited. And along with that, we also got a couple of new investors to join the table. So we had KKR, we had TBS capital joining in. And we also had investors like Norwest who put in additional money at that point of that valuation was about 10,300 crores so, so that happened in early 2021. And then finally we did this IPO at about 13,000 crores.


Siddhartha 11:22

So were these investors happy with a 30% valuation jumping in like one and a half to two years.


Rangarajan 11:29

I think given market conditions, these are great numbers to do with. So I think in general Five star has ensured that any investor right from 2014, we had our first round in 2014 with Matrix, there was just a $3 million round. And you will be surprised to know that till the IPO Matrix has not sold a single share. So they sort of continue to hold all the shares that they did in 2014-15. I’m sure they’re sitting on a very good Exit Multiple. They part sold a little bit during the OFS as part of the IPO. Forget just the investors who participated in 2021 I think every investor in Five star, this is a deeply value trading company. And we don’t do any short term tactics to just get our price up.


So most investors, anybody who has been party to our journey, whether it is an investor, whether it is an employer, Whether it’s an employee who has got his shares through ESOPs or a lot of individual investors who sort of bought our shares during this journey. I’m sure everybody has been extremely happy with the way that we have been value accretive to the shareholders. So that ‘s an interesting thought, because when the current Chairman and Managing Director, Mr. Pathy came into the business in 2002, the business was not in good shape. So we were probably in a negative network at that point of time, and we were a loss making entity.


So the DNA of the company is not to lose money, the DNA of the company, right from that point has been how to make sure that you are absolutely averse to risks, you are avoiding losses, you’re profitable from that point of time. So when he turned around the business, I think, right from 2005, 2006 onwards, we have never lost money every year, whatever we have invested, we have not been paying a dividend. So that has got completely reinvested into the company. That mindset has helped us to ensure that any shareholders, who’ve participated, there are some shareholders who have bought our shares prior to 2010 Also, so I’m sure all of them are pretty happy with the journey that they have seen with Five star so far.


Siddhartha 13:31

Now, let’s get to the history of Five Star.


Rangarajan 13:35

We share this unique thing. I don’t know if it’s good or not, I think it is good, we are the oldest unicorn in the country. I don’t know about the youngest unicorn and oldest unicorn, we are 38 year old unicorns. So, we started in 1984. The company was started by a gentleman called Mr. Rangarajan, he did not have a finance sort of background, but I think purely out of interest and his intention to start catering to a niche segment he and a lot of well wishers and his friends got together in 1984 They put small capital, these are not people with a lot of wealth, they just put small capital to play and they started lending to people who are largely ignored by banks.


The products that they started with the student loans, three wheeler loans, and slowly they also started expanding into consumer durables. It was good going, because very limited scale, very limited aspirations, I would say, no external capital, nobody to answer to, and it was a deposit taking NBFCs at that point of time. So it sort of gets self funded, you’re from a respectable background. So people trust you and then give you money as deposits and you sort of redeploy that in the business and run with it.


Siddhartha 14:50

And you give depositors 8-9% ?


Rangarajan 14:52

At that point even higher, because we’re talking about 1984 and stuff. But towards the late 90s we slowly started creeping into the company largely I would say because of the product focus into unsecured loans, consumer durable loans. And more importantly, because large private sector banks started coming into the fray at that point of time, you had the likes of HDFC Bank and ICICI Bank entering into a vehicle financing segment in a very big manner at that point of time. So a company with balance sheets of five six crores with very limited distribution scale and not having the financial muscle, how do you really compete with giants like them.


So that sort of also, we realized that at that stage, because of the focus on some of the unsecured products, that the company had not focused on the right set of products, it created losses, and we were not able to recover some of the money that was given. This led to the company actually moving into a negative net worth zone around 2002. So Mr. Laxmipathy, he is the current Chairman and Managing Director, he is called Pathy and he got married into the family around that point of time. And he did not have any background in financial services, I think there was one thing that is absolutely great about him. But he took it as an absolute challenge. It was his father in law’s business. And he got thrusted into the business because he saw him suffering. And he wanted to make sure that whatever contribution that he could make to the best of his abilities, he got his own capital at that point of time.


So when he critically analyzed the business, there are three factors that played in his mind. The first is, who is the customer that the company is serving? The company was serving customers who are not catered by the banks and large financial institutions. That’s a niche, he wanted to absolutely protect that niche. Because you have to build on something that you’re really good at. Point two what is the product in which you’re focusing the company was focusing on unsecured products and on vehicles. Now, in vehicles, it is pretty much undifferentiated because you will realize that within lending, there is cash flow based evolution and there are product based evaluations. product based evaluations are easier, you don’t bother who the customer is, whether it is gold, or whether it is a vehicle. As long as you own a Royal Enfield, I’m ready to give you so much. I’m betting on the fact that I will be able to repossess and sell Royal Enfield at a particular price, not really bothered about your cash flows or your ability to save.


So similar is the goal, these are product based evaluations. And that’s easier. Now, when product based evaluations for a company to compete with giants, you will have to generally price it off better otherwise, why should people come to you whether you are a person who is just a laborer, or you’re a very rich person, as long as you’re buying Royal enfield, and I think you can buy it, mostly it is product, while cash flow will have some effect, but it’s largely on product and not on cash.


Siddhartha 17:51

And large banks would have better distribution.


Rangarajan 17:52

They will definitely have much better distribution, deeper pockets. So he realized that we can’t build a sustainable model on this product focus. And the third aspect of the business was really on what’s the business model? What he realized is that it’s not that people are bad. In general, anybody who takes out a loan has an intention to repay the loan, that intention stays good, as long as the times are good. But everybody goes through good and bad times. I think when the times are bad, the same person behaves very differently for different products. And the company has seen that when you’re financing a refrigerator, or a washing machine or a microwave oven. if times are bad, at best, you will go and say you repossess the washing machine, what do you do with the repossess washing machines, you’re not going to get your money back, but probably the customer is not going to behave if let’s say the collateral that you have taken is something which is more serious in his life, something which is more emotionally attached to his life, like a house.


So that is where the thought of Mr. Pathy came in, that while the customer segment that Five star was serving was always good, and we wanted to continue on that. But when it comes to products and the business model we will have to alter it slightly. So give them a product which is more important to them, which sort of really helps them go to the next level of their life. So when they want to start a business nobody trusts these people. So don’t give them 20-30,000 rupees give them three lakhs give them five lakhs. Remove them from the clutches of a moneylender, give them that money, but at the same time ensure that they stay absolutely serious till the last EMI. For that you take the house as collateral, they are not going to be behaving to you differently during a good time or a bad time. And that was a spark which came to him.

So he wanted to experiment. Around that time he did that in Chennai he did three cycles of experiment of actually giving his own money making sure that the money comes back.


Siddhartha 19:49

And what was the order book like when he was lending?


Rangarajan 19:51

I think in 2006 it was pretty much five six crores, by 2010 we had become about 25 Crore books. It started very small. So from 2010 we were at 25 crore books and every two years we were doubling the book now for 2012, we became 50 crores, 2015 we became 100 crores. So by 2014, we had about 30 branches across Tamil Nadu, three cycles, our own money is Lent, money is coming back to a profitable business. That’s when he decided that let’s take it to the next level, he invited the growth capital, which is important, and Matrix came as a first partner.


Siddhartha 20:24

And what was the valuation they raised the 3 million at?


Rangarajan 20:26

Very less let me say, I wouldn’t say less, because that’s not being fair to The Matrix. It was appropriate. But at that point of time, with a scale of just about 100 crores, they came in at a fair valuation at that point of time, and our promoter, Mr. Pathy was very clear. The first investor, you are bringing him not for valuation. You’re bringing him for validation of your business model. With Matrix coming into it, I think we got noticed in the world, here is a company called Five star. I think they are doing a nice job. And that got us into the next orbit, I would say, Because without metrics, forget about the valuation, I don’t know how many professionals including me would have joined.


Siddhartha: 21:06


Rangarajan: 21:07

So with external capital coming in, the next order is to get the professionals to join, because that’s where you really scale up, build up a good team. So between 2015 and 2017, most of the professionals that you see in the company today got built in a two year period.


Siddhartha: 21:19

You came from an investment banking background?


Rangarajan: 21:20

So I came from an investment banking background, I knew this company earlier. And I was sort of informally involved with the company in the matrix round. So both the investor sort of knows me and the promoter knows me. So when they pitched to me that, this side of the story is going to be a lot more interesting and exciting. I decided to take the plunge. Between 2015 and 2022, we grew by about 50x, we spoke of 3x when we started, but we actually grew by about 50x. We had 130 Books, 130 crores book into 2015. And we just ended with about 6200 crores of books as of December. So that’s a large jump, I think we have done about six rounds of private equity capital, and that culminated in an IPO, which we did in November 2022.


Siddhartha 22:03

And the money you lend, is it still coming from depositors?


Rangarajan 22:06

No, so somewhere, early 2000s, we surrendered the deposit taking license, because RBI is very particular that if you’re a deposit taking NBFC, the level of compliance, the level of rigor, the level of MIS or the returns that you will have to file it’s a lot higher than non deposit taking NBFC So, the company voluntarily surrendered the deposit taking license and since then, we have been a non deposit taking NBFC, pretty much now if you see any new licenses that RBI grants, it’s never for a depositing license. So, most of the people who still hold a deposit taking license are all older NBFC, which got it in the earlier regime.

Siddhartha 22: 44

So where does your capital come from?


Rangarajan 22:46

So, our capital comes from three sources in of course equity, which is the capital that we have raised and like I said, internal accruals we don’t pay dividends, we are confident that the company is definitely using the growth capital moving further, so we are a very good cash flow accruing company. So the entire profits get reinvested into the business. And third, of course, is the debt capital which comes from banks. We have more than 50 lenders at this point of time, a combination of private sector banks, public sector banks, larger NBFCs, and different types of instruments, it could be securitization, NCDs, some ECB is that we have taken some impact funds which have invested in us so it’s a combination of all that which sort of works.


Siddhartha 23:24

So now let’s dive into the market. What does the lending market in India look like? Especially interested in the NBFC markets, which comes after the big banks, because today, every Fintech startup wants to become an NBFC through their own books, not an external NBFC and every NBFC wants to become a FinTech.

Rangarajan 23:48

Correct, both are quite difficult. See, you leave the banks, I think NBFCs broadly you might want to categorize them as asset financing or product based NBFCs. So, this is what we covered a little bit earlier. Which is easy to scale, difficult to differentiate distribution will have to play a large role, and the balance sheet is absolutely important for you to become big. So, I would categorize vehicle finance companies into this, gold finance companies into this, any product based lending gets into this segment. Then you have the entire spectrum of anything beyond product based, you have housing finance companies, you have lab companies, you have business loan companies, you have personal loan companies, you have consumer durable loan companies, any of this needs a different kind of rigor and a different kind of business model that you sort of build.


Different NBFCs depending on their scale, strength, background experience, decide to build on a particular niche that they are particularly good with. The market is large, because I think in India, banks still cater to, I would say largely the top 20% for various reasons. It could be the diverse geography, it could be the unorganized nature or the spread of people that were there. Or it could be the difficulty in assessment or collections where banks have largely stayed away from the bulk. So there are a lot of niches that NBFCs can build. Over the last few years, you will also see the importance that the regulator is giving to the role that is being played by the non banking finance companies in the country. It’s not a competition to the banks, and they believe that truly financial inclusion is possible only with NBFCs filling in the last mile. So that’s the role that the NBFC plays. And within that, how we build your niche depends on your experience and expectation.


Siddhartha 25:35

You’re today a product based NBFC?


Rangarajan 25:37

We are a cash flow based NBFC. So a product based NBFC is, I would say in simple terms, where you have a template, and you say, if he fulfills this template, you can go ahead and give him a loan of so much. The classic example is the Royal Enfield example that I gave, the 2015 Royal Enfield model, somebody is going who’s coming in, let’s say for a second hand financing. It’s a template. Please give him so much. It’s clear. But you can’t do that. Let’s say when a guy who is owning a Kirana shop is coming to you and asking for a loan, you will have to get into the merits of the case. How long has it been running? Is it really running? What is his experience of running the store? What is the cash flow? What are his obligations, you get into the details and merits of the case.


Siddhartha 26:20

But the Kirana store is not maintaining Excel sheets?


Rangarajan 26:22

It’s not, that’s where the challenge is. And that’s where the opportunities are.


Siddhartha 26:26

A Kirana store doesn’t have organized data on an Excel sheet. And you’re asking, for example, a shop or a house as a collateral. So where do you get the data that the kirana store will be able to pay back?


Rangarajan 26:37

Let me just retrace a few steps back. It’s important to understand who the customers of Five Star are. The simplest way in which we define a customer of Five Star, is anybody without whom a common man cannot lead a smooth life. We see people who are providing us products, and we see people who are providing services. So from a product category, it could be anybody who’s selling something through a shop, it could be a Kirana guy, it could be somebody who owns a hardware shop, or it could be a service guy, somebody who’s running a repair shop, or mechanic, a saloon guy, each of these people. I think the first question that you should ask is, do you really think they have cash flow? Or do they don’t have cash flows, because when you go and enjoy a product or a service from them, you pay them, you can see customers walking in, you can see customers literally paying them, he’s doing brisk business. So the fundamental thesis is cash flows, they have cash flows. I think if you believe that they don’t have cash flows, you can’t be in this business. We believe that they have cash flows.


Now, the question is how do you evaluate the cash flows? Most people find it difficult to evaluate cash flows, because they think that they don’t have any organized way. Our hypothesis in this is that if he has cash flows and if the cash flows are real, the cash flows have to get reflected somewhere. There are primarily two things in which everybody would like to reflect their cash flow. I mean, fundamental to human psychology, either you reflect in a better living style or you reflect the asset creation for you and your family. We check for evidences for both of this, if a guy really says that he has been running this Kirana shop for 10 years, and on average is making 40,000 rupees a month, we will do a quick math roughly he is doing about five lakhs a year and he’s doing it for like, whatever 10 years.


So, even assuming that his expenses are there, has he created assets worth five six lakhs in his life. So, we will go to his house and we will check, did he really buy this house or is it an ancestral property? What is the kind of living style that he has? What flooring, what furnishing, what size of TV? Is there a washing machine? Does he have a two wheeler, his wife wearing jewelry are all incidental data points, which will give you the proof that they are actually the cash flow being utilized in the form of either living style or the asset creation. That gives us confidence, that firstly the cash flow is real, the second part is we have been doing this for about 15 years now. So, I mean, if I were to take Kirana shops as an example, I think we’d have done about 200,000 Kirana shops, so far.


Siddhartha 29:08

How many customers do you have?


Rangarajan 29:10

We have 270,000 live customers. There are customers who would have closed the loan, there are customers who would have evaluated and rejected. I think we would have evaluated well over 500,000 so far. So of which, Kirana shop is the most common so there is a lot of institutional knowledge that somebody who’s running a Kirana shop, this is the kind of a store this is the kind of the road in which he is neighborhood is set up a shop, there is going to be an average cash flows at the Kirana shop in general, that’s a starting point. There is a gross income level, but this business does not run on gross incomes this business runs on net incomes.


So from the gross income how do you derive net incomes that is the personal habit for two Kirana shop bases could be very different. The family situation for two Kirana shop guys could be very different. He could have a sick member in the family for which there’s a lot of medical expenses he’s incurring. or somebody can have a bad habit, he’s drinking too much. He’s gambling too much, he’s wasting money on online games. So these things you will not know, as long as you’re just thinking that I’m evaluating cash flow, from a Kiaran shop, but I think if you have time, the energy and the patience to spend a couple of days with them, and the family, doing the proper neighborhood checks, you will realize and you will be able to create a synthetic cash flow for that firm, which is evidence through physical assets or the living center they have created, that forms your basis of what you really want to give.


I think the second point is that is that you are really not worried, or it’s not that important to exactly pinpoint with Six Sigma accuracy on what is his cash flow, is it 25,000 or 26,330 rupees, it doesn’t matter, you have to be in the ballpark, because then you have enough margin of safety in the form of debt burden ratio, you are not going to give an EMI that he has to pay for 25000 rupees, your EMI is going to be hardly about 8000 rupees or 9000 rupees in a month. That’s the margin of safety that you play with. So when you do this, it’s a large opportunity. These are people who don’t have formal documentation, but it doesn’t mean that they don’t have incomes. Now, just because they don’t have formal documentation, or just because they don’t have transacting banking habits. Most fintechs and most large banks do not want to get into them.


Siddhartha 31:23


Fintechs are getting into them right? They are getting into QR codes.


Rangarajan 31:26

I think the situation is far better than what it was earlier. But it’s still a large market. I think fintechs are focusing more on larger cities, and it still takes a lot of time to penetrate deeper. But the point really is that, cash flows are real, these are not imaginary cash flows, cash flows are real, it’s that much more difficult to evaluate the cash flows, but if you sort of perfect that model, over a period of time, the market opportunity that you can cater to is literally very, very large.


Siddhartha 31:52

How many cities are you presenting today?


Rangarajan 31: 53

See, we have 369 branches as we speak.


Siddhartha 31:56

Branches as in what, is it like a bank branch or a smaller one?


Rangarajan 32:00

So these are, when we start with we will start with 500-600 square feet, the one thing that we are very conscious about is that given our customer base, you can’t make the branch too sophisticated, people will have to relate to your brand, people will have to feel comfortable walking in. So if you’re making it sort of sophisticated they may not even walk into you they will think this is for the rich. So it’s our all assets like branches that are always rented, we don’t own any of these premises rentals, we’ll be starting at just about 15,000 rupees per month. So because of being asset light because of being very, very close to the ground, most of our branches break even in less than six to nine months. So you don’t burn cash when you’re opening the branches,


Siddhartha 32:41

What is the general geographic location of such branches?


Rangarajan 32:44

We are largely focused between tier three cities and tier six cities.


Siddhartha 32:50

Can you give a few examples of the top cities?


Rangarajan 32:52

So in Tamil Nadu, there are very very small locations like Yedapalli, Nagercoil, Thuckalay, Tiruchendur, if you take Karnataka apart from the big cities we are also there in many smaller cities. We are there in a lot of places in North Karnataka, in Maharashtra we are there in places like Solapur, Sangli, Pandharpur. In Madhya Pradesh we have about 40 branches today. So in Andhra Pradesh, which is often an ignored market, we have more than 100 branches only in Andhra Pradesh. So it’s a large market, we believe that tier three to tier six or to seven is a very big market, because most larger financial institutions do not get there. And we are displacing money lenders wherever we go.


Siddhartha 33:32

So you’re not really competing with other NBFCs or banks?


Rangarajan 33:36

So that’s the core of what we do. If you were to take how many loans that we take over from other NBFCs and banks, it’d be pretty much nil. Most of our focus has been how do you get people from unorganized borrowing or the moneylenders that they are trapped with into coming into an organized fold. There are multiple advantages when they move from unorganized to organized, they’re coming into a safe zone, their properties will be handled in a better manner. We are regulated by the RBI. I mean tomorrow there is an issue. There is a clear customer production that we can do but what if a moneylender is going to act in an unreasonable manner.

So those are advantages and people see that brand and trust getting built over a period of time and they feel comfortable talking to us.


Siddhartha 34:39

And you’re only present in the southern part of India?


Rangarajan 34:20

So the southern part is the bread and butter of what we do. Even today I would say about 93% of our book is in the southern part of India, but we started expanding slowly into the central Indian geographies. These are about three four year old we have presents today across Maharashtra, Madhya Pradesh, Chhattisgarh and one branch in UP, so these are more recent vintage states. Now I think one learning or one strong belief that we have is that this model takes time to build in each state. You’re not in a manufacturing setup where you’re successful in Tamilnadu automatically you will be successful in Maharashtra it doesn’t work like that, that state has a character in that state you’ll have to form the team right, In that state, you will have to understand the land records really well. It takes time. So we are not impatient.


I think when we put up a branch in any new state, we will at least wait for 24 months. The first 24 months is a learning period for us with no targets. But in the first 24 months, we want to really see which are the employees we are able to attract, see how loyal they are? How competent are they? What is the leadership that is getting formed in the particular state? Any customer frauds, any political influence? What are the challenges with respect to establishing title and land records in a particular state? At the end of the 24 month journey, we will have a pretty clear, should press the accelerator in a particular state? Or should I want to go even slower, depending on what works out, then we decide to expand faster.


Siddhartha 35:47

And you also close branches actively.


Rangarajan 35:48

So unfortunately, in lending, you can’t close the branch because you have lent money. You may stop doing new business. But if it’s a mess, you don’t have a choice of walking here. You have to make sure that you’re cleaning the mess. Touchwood we have not closed the branch, but what we can potentially do, let’s say, if we realize the location is wrong, we will merge a branch with another branch. So maybe, there are two branches, which are too close to each other. In some sense, one branch, we may have had people issues. So that branch will probably merge with the more senior branch or a more stable branch in that location. We can’t close a branch.


Siddhartha 36:25

And you’re also in like all southern states, even Kerala?


Rangarajan 36:33

Except Kerala. I wouldn’t want to say anything negative, but it’s a state which is slightly different from the four Southern states.


Siddhartha 36:40

Everybody is buying lottery.


Rangarajan 36:44

I don’t want to comment on it. But what we have seen so far is that for a non Kerala state NBFC, to go and establish and be successful in Kerala, it’s difficult. So unless you are doing your homework right, and unless you have really understood the culture there and you’re good there. You can’t just automatically go and replicate what you’ve done in the other states. We will certainly enter Kerala. I don’t think we have any bias against Kerala but it’ll take its time.


Siddhartha 37:12

So there are thousand NBFCs in India today, more than thousand, what would be the exact number?


Rangarajan 37:18

At least 10,000 NBFCs are there in India.


Siddhartha 37:21

So let’s say you are among the top 100 right now, who are the top 10 today?


Rangarajan 37:26

So the big daddies of NBFCs will be Bajaj, Sri Ram, Mahindra, I think quite a few listed ones, they will be the top. I think today, if you were to look up, RBI has been pretty proactive because it’s clear that you can’t have the same regulations for the 10,000 NBFCs. You have a limited set of banks, it’s easy to regulate a bank, but how do you regulate the 10,000 NBFCs?


Siddhartha 37:48

I think they have not been given a new banking license in ages.


Rangarajan 37:52

Correct. But when it comes to NBFCs, even today, people get licenses, but not everybody can be painted with the same equation. So we got this scale based regulations about a year back. And as per that there are three scales or three levels in which they trade NBFC. There is an upper scale, upper layer, middle layer and a lower. Upper layer, it’s more or less a top 10-15 NBFCs. And the upper layer regulations are largely almost in line with that of a bank, because they don’t want to see this regulatory arbitrage between a bank and an NBFC. So any arbitrage which existed early, it’s sort of getting blood plugged now.


Highest level of regulations, because they pose the highest level of systemic risk to the entire sector. One fails, I think potentially, it could have disastrous effects. Then comes the middle layer, middle layer, except the bottom layer, which is like some 1000 Crore companies, everybody else is in the middle layer. Even middle layer RBI has been, I would say, pretty much proactive over the last few years in ensuring that firstly, any regulatory gaps are getting plugged. And secondly, formally recognising the role and the importance of NBFCs in the sector. At one point of time NBFCs are probably not enjoying the same mindspace that they enjoyed earlier because it was a shadow based lending, people who are not happy about the practices and people who are not happy about the regulatory oversight that RBI can potentially have on these entities.


But that pretty much is plugged today. More regulations, more in line with the banks, but that also in line brings the trust element, brings in line the fact that your books are clean, that brings in new lenders, banks take more comfort in their lending to NBFCs because the regulations are that much more cleaner, books are that much more cleaner, they are coming on par with banks, that is the role of regulator and that has really helped over the period.


Siddhartha 39:42

For example, the way you are positioned in distribution is your first difference, the tier five, tier six that you are present in. The second is the brand that you have built over a period of time and third is your customer base. More unorganized that you can enter.


Rangarajan 39:59

So I don’t agree with the order. But I think the first is that we are a creative category. Today it’s fashionable to talk about lending to small businesses, 20 years back, it was not. So at that point of time when somebody decided, Mr. Pathy decided that this is the space to go and really build a niche. So the first differentiation is somebody to have the conviction and courage to get into the sector. There were no rules, how do you relate to them? How do you assess cash? Today you’re asking me how do you assess Kirana shops with all the sophistication that we have, with credit bureau penetration with Jan Dhan accounts, with mobile penetration, with alternative data we are asking this question, imagine the situation 20 years back, it was a very different market.


So I think the first real differentiation for us is that we understand this category deeply enough. We were one of the first few players to create this category. And we had a free run for the first 10-15 years. So there is no FOMO, there is no external threat or a pressure for you to grow at a particular pace, your own capital, your own customer base, take your pace, take your time, understand what works, slowly build and it’s purely his own money or the company’s own money, no external capital. So you’re very careful about every element of business that you build. That is the niche that we have created.


So it’s about the customer. It’s about the business model that got built. It’s not copied. Today if somebody were to start a similar business, it’s very difficult for them not to get distracted or not to get influenced by other business models. But I think we did not have that. I think that worked to our advantage in terms of how you build. The second niche is the team that you have built with. Because many NBFCs, maybe even bigger than us or whatever scale, I’m not sure if they have focused as much on building the right team. But I think if you do take the time to understand what is our second layer, there is the promoter, Mr. Lakshmipathy. But I think if you were to go to the management team, we have 21 people at the management team level in Five Star, each of them coming with very, very rich experience, backgrounds, working in larger banks, they have come in here.


That sort of provides a very, very stable, second line management team level, which is a very, I would say refreshing niche that you’re building in an NBFC. One of the things that an NBFC will struggle beyond a point of time, is what is the team? Is it dependent on one person? Is it dependent on a few people? But I think when you’re crossing that threshold, you’re building something far more sustainable, that differentiation is going to pick up pace over the period of time as we scale.


Siddhartha 42:41

And let’s say right now, you would be around 70 or 80 rank in India. Is their aspiration to go to the top 15- 20 in the next couple of years?


Rangarajan 42:54

I’m going to be careful about the way I’m answering this question. Everything has a time and place, you don’t want to be rushing to that spot by doing something, which is not good for you. If you are diabetic, you can’t have sweets. I think just because the other person is having sweets, if you start eating sweets, and it’s not good for your health, you’re going to affect yourself, we have a similar philosophy, we will grow at a pace that is comfortable to us, we will definitely grow much better than the industry average growth, which means our rank will improve. But will it happen in a few years, will it happen in 10 years? That’s a difficult guess. We will continue to believe that we are serving a very large market. We are in a unique niche of having understood the market, having 20 years of experience in what we do. And building a sustainable model on top of it, our market is not something which is contracting or the market is not something that is seeing so much competition today that people are just falling. We are in a very early stage from that perspective. So we have a long runway. So with that said, I don’t want to attribute whether we are aspiring for a 10th rank or 15 rank. For sure, the interest is going to be on how do you gradually and steadily improve your rank?


Siddhartha 44:11

And let’s say today, I’m a founder and I want to build an NBFC without any prior experience. What is required by RBI to build an NBFC?


Rangarajan 44:18

See there the regulatory requirements are pretty simple, You will have to apply to RBI today. You have to have a minimum of two crore capital.


Siddhartha 44:29

Own capital or a borrowed capital?


Rangarajan 44:30

Anything. It’s the equity of the company, So you could have investors for that. So the RBI will do its due diligence. If you have pretty much zero experience. The question is, the RBI will say why go and give a license to you. But you may not have the experience but your team may have experience. I think you’re able to build something and then apply for a license. That’s probably the cleanest way to start rather than buying an NBFC for a license. Applying for a license, RBI is pretty proactive with that. Potentially you will get a license.


Siddhartha 45:00

How much time?


Rangrajan 45:01

We have not applied. But what I hear is maybe in the six to eight month time zone, you will get an answer from the RBI. So it’s a pretty transparent process. So RBI is one of the real, I would say proactive regulators, it’s not that you are not going to know where you are, you will be reached out to, you will be asked questions, you will be asked for additional information, but you will get an answer.


Siddhartha 45:21

And how many new NBFCs are created in India every year?


Rangarajan 45:25

I don’t have a specific number, but I’m assuming that it’ll be a few hundreds. But more than that, RBI has also been proactively canceling a lot of NBFCs, which hold the license, the 10,000 number that I told you must have been about 13,000 plus three, four years, so there are consciously 3000-4000 NBFCs license which I’ve got canceled over a period of time. And if you go to RBI’s website, I think every week or something like that, you’ll keep getting emails from RBI, following NBFC license or cancel, so it’s both ways. Net net I don’t know if it’s increasing, or because net net, I don’t know if 10,000 series players exist in this country. People got an NBFC license for various reasons in the past. But I think the way the regulations will evolve over a period of time, you may not have 10,000, you may have 2000 NBFCs, but pretty much serious in trying to penetrate and create a niche of what they want to do.


Siddhartha 46:16

And towards your business model, do you want to keep on being what you are and expand your distribution, or you want to become a fintech also and start using digital lending to do what other people are doing.


Rangarajan 46:31

See, technology has to be embedded in any business that you do. There are no two thoughts about this. Forget about even financial services, whether you’re in manufacturing, today, you are in services today, you are in steel manufacturing, you are in a hotel business, you are in FMCG business, anything that you do today, I don’t think any business can afford to ignore the role of tech. We are pretty clear about that. So that is the easy part. But how do you integrate tech in a manner that is not too intimidating to your customers, and in a manner where you’re not missing the fundamentals of your own business, that’s the key. We will integrate it, we are investing in tech, we are absolutely integrating tech into anything that we do, which will enhance efficiency. But does that mean that I’m aspiring to give a loan in two minutes? A seven year loan in two minutes? I’m not sure.


Our thinking today is that in lending, the art is collecting impact. And I don’t know if it’s pretty obvious, but if you really think about it. The lender makes his money only in the last few EMIs. If you have, let’s say a 60 month loan, the first 55 months, if he repays well, you don’t make money. You’re getting your principal back, you’re repaying your borrowed money, you’re meeting your operating expenses, the last five EMIs if it comes properly and on time, that is where you really make a profit. So you have to think that far, if you’re giving a 60 month loan, and you’re, trying to create a Zepto, an equal model in an NBFC where I know I want to instantly deliver and instantly, I’m not sure you want to compete in that, let me not say whether it is right or wrong, but I’m not sure if that is really, Instead, I want to see how potentially I like it. I said I have experience of over evaluating 200,000 kirana stores.


How do we digitize this, how do we digitize and get this as an institutional knowledge and not an individual knowledge? How do I sort of get AI or a programme which sort of understands this and provides these early warning signals about what could be right or wrong? How do I create a customer scoring model in the absence of large alternate data which is available for the top 20% of the country? So technology will 100% be infused? No doubt we are very serious about what we want to do. And we are definitely investing across various things in technology. But is it going to be in the manner in which you normally understand the way the technology is advertised in a FinTech model? Maybe we will not compete in that. So I don’t know if we will want to call ourselves a fintech company. But getting into finance is something we will do.


Siddhartha 49:20

Rangarajan, you joined as a COO of the company in 2015, having seven to eight years of investment banking experience prior to it. And I think after three to four years of being a COO, you are elevated to the CEO of the company. And I think today Mr. Pathy is hands off?


Rangarajan 49:38

No, no, absolutely not. He’s a very hands on promoter, but you continue with your question.


Siddhartha 49:44

So being a CEO and a non founder, do you think it’s a way that Indian companies are going towards, because traditionally we have been founded if you see the large houses.


Rangarajan 49:54

Very interesting question. So that is why I think just prior to joining Five Star I had overall close to about 12 years of experience. So I started my career with HDFC Bank. Then I was working with Standard Chartered Bank, I decided to do a second MBA, I went to ISB. Then I worked with the World Bank Group for about two years. Then I had investment banking experience of close to six years. Now, it was during one of those 6 years in the investment banking experience that, both the investor who invested in matrix, and the promoter, they knew me. both of them knew me at some level, and they wanted to explore if this is something that I want to take, honestly, at that point of time, it was a bolt from the blue, Because the company was about just about 100 crores, 130 crores, I remember, the first thing that I checked at that point of time is what is the promoter salary. I took the balance sheet and I wanted to check. And I was pretty depressed when I saw that his salary was less than what I was earning.


So I was not sure whether this is even going to work for me, not going to work for me. It took four months to be constantly engaged with the promoter, not just within myself, I had to discuss with him at multiple levels, multiple backgrounds, different environments, and various things that I really wanted to be clear about. What is the intention of the promoter? Is this something that he is trying to do just as a short term gig to satisfy an investor who is just coming? Or is he very serious about taking it to the next level?


Siddhartha 51:28

Giving control away, that’s a big thing.


Rangarajan 51:30

Yes, not fully but even partially. It’s a very big decision for the promoter. So I remember in that phase, having asked him extremely difficult questions.


Siddhartha 51:39

Like, what were some of the questions that also the audience were aspiring to be.


Rangarajan 51:45

I remember at that point of time, my first interview happened in Five Star’s office, which happened to be on the first floor of the promoter’s house. So the office itself was in the house.


Siddhartha 51:56

How many people were there?


Rangarajan 51:57

About 15-20 people.


Siddhartha 51:59

15 people in the core team, and then field people.


Rangarajan 52:00

So I remember asking him this is not how I aspired it to be. So will you eventually change your office? He said, Yes, I have done this to save costs, nothing else. But I think as we grow, if this is important, we will do it. I remember asking him a question. I’m not sure if your auditor is right. Will you change your auditor? So very huge questions, and why are you getting me in? And what if, let’s say we’re not happy with me for six months, I’m leaving a very high flying career. If you’re not going to like me, in six months, you will just say you lose nothing. But I have lost something which is big. So a lot of these tough questions and situations, we both sort of acted over four months. And then came a point where he said, I have told you everything that I know, now it’s for you to decide.


He said I was in a similar situation in 2002 when people asked me to finally make a decision. I asked so many questions, but beyond a point, they’ll say, it’s time to jump. So I decided to jump at that point.


Siddhartha 53:05

So you took the same salary or a cut?


Rangarajan 53:07

No. I came in with at least a 50% cut.


Siddhartha 53:09

And why did you do that?


Rangarajan 53:10

See, I was very clear that when I was coming here, I’m not coming in for the salary. I was coming in for the upside in the form of stocks. So I really negotiated hard on the stocks.


Siddhartha 53:21

You got ESOPs?


Rangarajan 53:22

Absolutely, so I negotiated hard on the Aesop’s and the promoter was kind enough to absolutely agree to my terms. He saw that at least our interests are aligned.


Siddhartha 53:32

Back then ESOP understanding was very poor in India, in 2015.


Rangarajan 53:35

Because for me, I had done multiple ESOPs structuring, with the clients that I had worked with, but you are right, I think when I spoke of ESOPs, the founder asked me a lot of questions. So he was asking me, how does it work? What price, what is the vesting? What are the expenses for the company, but both of us were clear that we will be absolutely transparent. And then he has to make a decision at that point of time. He was generous at that point. And I was clear that if I’m taking this kind of risk, it’s better to keep the risk equity oriented, your 50% salary, you will catch up at some point of time, but you can’t catch up to a valuation of that level ever again.


Siddhartha 54:17

You joined the same as a matrix valuation?


Rangarajan 54:18

Just as the matrix valuation. And the promoter was kind enough to give me the ESOPs at face value, not even the matrix valuation. Because he said, You’re the first professional who is coming and sort of trusts me here. So if it means that I need to give it to you at face value, I will give it to you at face value. For the first two or three people he did that and then it became the matrix valuation and then it became the next round valuation and so on. So that is an important phase. It’s good that we engage in those deep discussions right at the beginning, because we understand where each of us is coming from. And it’s not that we don’t have disagreements. But I think that the fine balance that we maintain between a professional and a founder, the energy And the strategy of a founder, coupled with the discipline of a professional, it’s a great combination for a company.


I honestly believe that at some level, today being a founder is too glamorous. I’m not sure if it’s good for all. It’s good for some, but we see more success stories than multiple failure stories.So you should be humble enough, you should be very clear about evaluating what your strengths and weaknesses are. If you’re not a founder, it doesn’t matter. But if you can hold hands with the founder, and you’re helping him scale these businesses, both career wise and rewards wise, you will be fairly adequately rewarded during this entire journey. So it’s a very rich journey, but you will have to find the right founder and the right professional fit.


Siddhartha 55:48

Do you ever think that you will start from zero ever, ever again.


Rangarajan 55:52

One thing I have learned in my life is not to predict the future, be open minded, things will happen, things will come. But I’m pretty happy about the position in which I’m there and the journey that we have crossed over the last about eight years. So let the future decide its course.


Siddhartha 56:09

IPO was a great milestone, being a professional you took a company to an IPO and corrected many peripherals after an IPO. They never witnessed that process.


Rangarajan 56:18

They never witnessed that process. Like I said, I consider the entire IPO experience. It’s absolutely no match to whatever experience I had as a banker. Now, as a banker, you would have been part of many of this IPO, but you’re not in the ring. You don’t know what it means to be the team or the founder who’s running the IPO, what emotions that they go through, what challenges and at some points of time, I felt how helpless the bankers are when you are on the other side. So it’s a very different journey, I’m very happy to have been part of his entire scale, and the IPO.


Siddhartha 56:52

How do you and the promoter manage separate responsibilities so that you don’t step into each other’s shoes often?


Rangarajan 56:58

So over the last few years, what we have been doing is that we are in multiple states. So we exchange responsibilities based on states. So there are some states that I handle exclusively, some states that he handles exclusively, of course, we are constantly, in sync with each other in terms of making sure that directionally we are right, and understanding the nuances of what works in a state what has not worked in a state and we also rotate this, so that he gets the experience of the states that I have handled, and I get the experience of the states that he has handled. So that has worked really well. Instead of one person pulling the engine. Now there are two people, and even the team sees you as pretty much flexible between the two, anybody can come for a review, anybody can ask questions, and anybody can take it to the next level. That is an advantage that you are creating as an organization.


Siddhartha 57:46

In the last eight years, first being a COO, and now CEO, what are the things that you have changed in the company that you thought could be done better, and what are the things that you have retained?


Rangarajan 57:56

So I remember, when I joined in 2015, after the first day, on the second day, I had to come out with a long list of things that I didn’t understand or wanted to change. Mr.Pathy, heard me patiently and he said for the next six months don’t suggest any changes. He said, anything that you say, maybe there is a lot of merit to it. But I think first before suggesting a change, you should understand why we are doing what we’re doing. It’s a very deep thought. So I understood the merit of what he said, because you can’t affect change if people are perceiving you as an outsider, you have to first Become an insider. And you don’t need to change everything, just because you have come in, if you start seeing everything wrong in front of you, there is no end to it.


It’s not a political game, an opposing party is coming, and then you start so everything is wrong, and you will start from scratch. When you start doing that, you realize why something is working in a particular manner. And what’s the pace in which you have to change a few things. See my biggest contributions, I wouldn’t call it change, but my biggest contribution has actually been to build teams.


The management team or forming the core team is an extremely important task so I think I really hit the promoter with that, taking interventions which have happened, capital raising, so that was coming naturally to me, the six rounds of capital raising, I think pretty much, I was like a banker. So no bank was working the other side, pretty much shoulder to shoulder again, trying to see how the best structuring is possible or the best valuation possible and how the best terms are possible. That’s a very important job. Because if you let out too much of equity, or if you have gone into a wrong term with a potential investor, both these are dangerous in the journey of the company. So my interventions are more towards that and actually giving the confidence to the promoter that we can scale it 100x. That comes when you’re structuring it right, you’re thinking about scale in anything that you do. These are my biggest contributions.


Siddhartha 59:56

Thank you so much for your help. I think this podcast is a master class on how to operate and run Five Star NBFC.


Rangarajan 1:00:05

Thank you Siddhartha, pretty much enjoyed discussing with you. I don’t know how you jump from one topic to the other to the other sector but you go deep into each of the sectors and like I started in the beginning, having done more than 200 episodes full time with this kind of rigor and this kind of a passion. Truly, it’s inspirational to see you doing this, continuing the good work. I will definitely be watching each episode. Thank you so much.



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