Exclusive: Former Hero Corp Services president Chanana backs Kudos Finance

Kudos Finance and Investments, a full stack non-banking financial company (NBFC) that enables digital lending services, has raised an undisclosed amount in an extended seed funding round, which it dubs a pre-Series A round, from former Hero Corporate Service president Rohit Chanana.

Chanana is currently the managing partner of Sarcha Advisors, a multi-family office and advisory firm he founded.

The Pune-based startup will deploy the fresh capital to develop indigenous technology products to strengthen its collaborations with fintech firms, Pavitra Walvekar, co-founder and CEO of Kudos Finance, told TechCircle.

The fintech company last raised an undisclosed amount of capital in 2018 from angel investors, including former Copal Partners managing director Sorabh Agarwal, and FPL Technologies CEO and co-founder Anurag Sinha. The latter has also founded personal finance platform Walnut, which was acquired by Capital Float in 2018. 

It has also raised about Rs 100 crore in debt from 11 lenders such as IDFC, Bank of Maharashtra, Electronica Finance and MAS Financial Services.

Walvekar launched Kudos Finance in 2014 as a traditional offline lender, offering small-ticket loans to micro, small and medium enterprises (MSMEs) and mom-and-pop shops, and selling insurance. In 2017, he initiated a pivot to the digital front, which gained significant momentum when former Bajaj Finserv executive Naresh Vigh joined the company as co-founder and COO. By 2019, Kudos transformed to a fully digital lending company.

The firm operates on a B2B2C model and has partnered with over 25 fintech startups such as Avail Finance and Razorpay to disburse loans. 

It has built an application programming interface (API) lending protocol layer to enable smoother collaborations with B2C digital lending businesses. While these partners manage the front-end of the lending process, such as customer interactions, Kudos focuses on the backend of the customer journey, such as authentication and verification services, customer on-boarding, KYC processes, e-sign, compliance, bureau access, underwriting, loan disbursal and loan repayment process.

“Fintech firms have to work with a number of vendors to get these multitude of things sorted. Also, the integrations and negotiations for these gamut of processes consume significant time and resources. We take away the pain of these backend processes, the infrastructure and the time required to underwrite customers,” Walvekar said.

“The initial API stack over the past couple of years has now evolved into a complete do-it-yourself lending API protocol. This has also created an opportunity of vast data lakes and building indigenous credit scoring modules,” he added.

For instance, let’s take Kudos’ partnership with Avail Finance, which offers small-ticket personal loans to blue-collared workers. When a customer, say a food delivery executive, approaches Avail for a loan, it will conduct a preliminary screening of the customer and pass on the details to Kudos. Then Kudos will deploy a detailed authentication and verification process to determine the eligibility of the request, and then fund the loan, taking into account the executive’s pay day, salary and company details. On pay day, the company he works for will deduct the EMI he owes Kudos before depositing the executive’s salary in his account.

“We are providing to the fintechs a full stack lending platform, segment specific underwriting model, financial capital and compliance. This enables them to focus on delivering value in their customer acquisition model and we provide efficiencies in the fully digital lending journey to deliver a win-win for them and us,” co-founder Vigh said.

Fee-based income accounts for a majority of its revenue, as it collects a fee from both approved and rejected customers for the authentication and verification services. It charges an interest rate between 18% and 24%. The company claims to have facilitated two million loans, disbursing Rs 1,000 crore to about 6,00,000 customers across 2,100 cities.

“We are part of a number of players doing different innovations, because of our IT stack, we have been able to build customized lending products depending on our part. We thus become a vehicle for financial innovation,” Walvekar said.