Financier Of Green Commercial Vehicles

The ease of compliance ensured by the Reserve Bank of India (RBI) has welcomed a significant number of fintech companies into the competitive lending space. One such digital lending startup is Revfin. Founded in 2017, the startup finances commercial electric vehicles (EVs) largely in virgin territories like lower-tier cities.

The lender has a presence in 18 states and primarily caters to that very risky customer segment that has no credit score. Even though 80 per cent of Revfin’s borrowers do not have any credit score or history, the company’s Co-founder and CEO, 

Sameer Aggarwal, reveals that the default rate at the company was below one per cent. 

Credit score and history of customers help lending companies assess the risk while offering a loan. Revfin has its own risk assessment tool. "We measure customers' intention to repay by using the psychometric assessment tool which we have developed jointly with IIT Kharagpur. The tool analyses customers' behavioural traits to identify their intention to repay a loan," explains Aggarwal. Currently, Revfin has an average loan size of about Rs 1,18,000. The startup also focuses on delivering after-sales services. "We assess risk on the product side. We look at the risk that comes with EVs. We partner with manufacturers and dealers to ensure that all the services are provided to customers post-sales,” he says.

Funding EVs

Electric vehicles (EVs) are acknowledged to be the better alternative to vehicles powered by internal combustion (IC) engines. In a developing country such as India, though, the main problem is in the adoption rate and awareness. Aggarwal emphasises that "the adoption rate in smaller towns is much faster than in cities. In some cases, small towns have directly leaped to EVs. In terms of awareness as well, it is pretty strong in small towns. People do understand EVs, batteries, and their concept. However, awareness on how to maintain and manage an EV still needs to be explained."

Revfin claims that nearly 83 per cent of its customers are first-time borrowers. The company has extended its services to over 6.6 million livelihoods. The vehicles financed by Revfin enable the EV drivers to earn Rs 25,000 a month, according to the company.

Bigger Vehicles 

The brand aims to venture beyond three-wheelers. "We have started financing two and four-wheelers. Two-wheelers are largely focused on last-mile delivery. In four-wheelers, we have started financing passenger taxis and mini trucks," Aggarwal reveals. The vehicle financing startup has around 20 per cent market share in four states, which include Bihar, Uttar Pradesh, Uttarakhand, and Jharkhand. It aims to capture a similar market share in the rest of the states in which it operates.

When evaluating the success of a lending startup, the annualised run-rate of loan disbursement is one of the key metrics to look at. Revfin is performing very well in this front. The company had disbursed loans worth around Rs 120 crore in FY2023 and targets Rs 530 crore for FY2024. Currently, it has an annual run rate of Rs 100 crore.

Revfin's success completely relies on the adoption of EVs across the country. The discontinuation of the FAME II subsidy may create a roadblock in this journey, but Aggarwal feels that it won't hurt the EV space in the long run. "Now, around 55 per cent of vehicle sales in India are electric. That convergence has already happened. At some point, subsidies have to go, and companies have to grow without subsidies," he says. "The subsidies on two-wheelers are low, but the total outlay remains the same. Hence, more two-wheelers can now be included under the subsidy. There is no negative impact long-term," he goes on to say.

With the emergence of AI and ML, fintech companies have been looking for models for a more seamless experience and assess risk more accurately. "Without data, we cannot create these models. If we look at our customer segment, customers usually do not have credit history, banking transaction history, and have a low digital footprint. The data available to them is limited. A lot of data regarding EVs is not fully captured." Hence, using AI and ML models for lower-tier cities will take time.
Today, our focus is largely on data collection. Once we have a sufficiently large database, then we can go to the next step of model generation with the help of that,” he says.

In June Revfin raised $5 million in debt from the US International Development Finance Corp. "International funds take a lot of time to do the diligence. For us, the whole process took about 18 months. We need to be patient while engaging with such funds. They go really, really deep to understand the market landscape, ESG, governance, and human resource policies," says Aggarwal. The Revfin team aims to have a presence in 25 states by the end of FY 2024. Moreover, it intends to raise funds worth Rs 350 crore in a mix of equity and shares. We wish them well.