Apollo Finvest (India) Limited ($512437)

Thank you so much. Good morning, everyone, and thank you for joining us today. I am Pooja Gohel, company's -- Chief Compliance Officer of Appollo Finvest India Limited. On behalf of the company, I warmly welcome you all to our quarter 4 financial year '25-'26 earnings call. Joining me today are Mr. Mikhil Innani, Managing Director and CEO of the company; and Ms. Diksha Nangia, Whole-time Director and CFO of the company. They will take you through the company's performance and key highlights for the quarter 4 and financial year '25-'26. [Operator Instructions] With that, I request Ms. Diksha Nangia to take the proceedings ahead. Over to you, Diksha.

Thank you, Pooja. Good morning, everyone. Thank you for joining our earnings call. I'll just request Mikhil to share the screen so we can take you through our presentation like we do every quarter.

Yes. Give me one minute.

Sure.

Yes. Is the screen visible?

Yes, it is. Great. So I think we can just get started with the first slide. Perfect. So of course, these are our financials, a snapshot of our financials for FY '26. Just to give a quick summary for those who have not had the comparative numbers, this year has ended almost on the same note as the previous financial year. But yes, the reason I said almost is because there's a slight dip in terms of revenue, PAT and AUM. And the rationale for that, I will take you through and again Mikhil will take you through the presentation as and when we move forward. But if I had to just give you a gist of why this is happening, as we have spoken in our previous quarterly earnings calls as well, we are transitioning away from the term loans that we have given out in these past few quarters. And of course, the rationale for giving out term loans previously was because we were still trying to pinpoint and still trying to cherry pick those few NBFCs we'd like to work and scale with. And in these few quarters, we were successful enough to identify those few to a point where we even realized what kind of lending, direct lending we would like to do as an NBFC. Now having shortlisted those co-lending partners for ourselves, it takes a lot of time, a lot of integration, a lot of effort goes on both sides to get this partnership live and to scale. Now our goal when it comes to co-lending partners is not to scale overnight. We like to scale in a gradual manner. We want to make sure operationally both the teams are aligned. We want to make sure the books to our satisfaction from a quality standpoint, from the data sharing standpoint for us to be more confident that, yes, we want to deploy more capital to this one particular partner. Well, the good news is in this last quarter, we've been successful enough to get -- iron out all those operational issues, gain confidence in the books of these co-lending partners. And now in this coming quarter, you will see our co-lending partners scaling even more. So that's one good news. And we are hoping that we'll all get the success and all the impact of all the increase in revenue and PAT eventually in the coming quarters, at least as far as our co-lending book is concerned. If we go on to the next slide, we'll talk about warehouse over there. Now of course, term loans are still a part of our lending book. Well, in Apollo, we just felt and we've explained to you earlier as well we didn't think that the traditional term loan model, which is being widely used and even we ourselves have borrowed money using term loans from lenders, is a very robust model for a lender. We've seen a lot of NBFCs go bust. And we understand that, that doesn't mean that lending to NBFCs is risky. We feel the model is a little risky because the due diligence that goes on is only up to a point that you have control, which is why we came up with this whole warehouse structure, which gives Apollo full control in terms of the cash flows. We have escrow mechanisms in place. We also directly get to see the receivables on our LMS. So there's an integration which happens, which is something that doesn't take place in other term loan structures, which are widely used in the industry. Of course, it's not easy to convince our lending, our borrowing NBFCs to adapt to these structures because otherwise, money comes easily to them. in the form of term loan structures. But of course, they understand that what we bring to the table is a lot more. They know that eventually, there will be a much deeper partnership if they develop this confidence in Apollo as a lender. And that's why close to 27% of our term loan book is in the form of warehousing, which is a lot more secure than your traditional term loan lending that you see. I mean, I know this number may look like just 27%, but let me tell you, it took us a lot of effort to convince people to do something that the entire industry is not used to doing at all. So that's our number for now. And we are hoping we'll be able to increase this number going forward or, best of all, get rid of term loans completely because now if we go on to the next slide, we'll show you what we have done. Now in this quarter, one big transition that we have made is previously 24% of our AUM was our retail book. But in this quarter, 50%, 51% of our book has been our retail book. And we expect this number to only go upwards. And the rationale for this, like I mentioned, one is, of course, us scaling with our existing co-lending partners who we've taken so long to integrate with to gain confidence from their book quality perspective. And all of this, which I have mentioned, our partnerships, co-lending books, term loans is just 30% of our company focus right now. 70% of our company's focus right now, and that will only keep increasing as time goes by is on our flagship lending product right now, which is Apollo Cash. And with all of these changes and all of these focus points coming in the picture, we expect that our retail book proportion will go even higher and hopefully back to our original 100% that we've had in Apollo for all these years. What I'll do as next steps is, I mean, I'll pass it on to Mikhil, and he will talk a lot more in detail about what is it that most of our company is busy doing with Apollo Trust. Thank you. Over to you, Mikhil.

Right. Thank you, Diksha. Just give me a minute. I'll set up my camera and then we can get going. So let's get going with what have we been cooking, right? So essentially, I think we've been mentioning for the -- maybe last quarter or so that the entire company was working towards our own flagship lending product, right? So happy to say that the cat is out of the bag, and we've been working on this from late last year, right? So October of last year is when we started our internal kind of work on this essentially. And today, I think we have some pretty good traction. Essentially, we are live pretty much across most of India, 19,000-odd pin codes. We've already disbursed INR 5-plus crores in this space. Obviously, as expected, the product is super smooth, 100% digital. You get loans in literally under 2 minutes. We already have got like 1 lakh plus downloads and all of this has come in pretty much 0 spend on any kind of paid marketing, right? Like there's -- we don't even, at this point in time, have done any kind of ads of any sort, right? I think obviously, we've got 750 thousand applications, 18,000-plus loans already disbursed, right? So you can see that the traction that we have over here is pretty significant for a product which has realistically been out in the market for, I would say, about roughly 3 months or so at this point in time. So one of the big learnings that we've had is that over the course of the last 8, 9 years, there's been a lot of brand building, which has happened even with the customers, right? So with 0 marketing at this point in time, we've got this much amount of traction. And the reason for that is essentially, I think a lot of borrowers out there have already heard of Apollo, right? And when we actually put out the app on the Play Store, we started getting almost close to 1,000-plus downloads, 2,000 downloads every single day at this point in time, largely because of our name was being searched by borrowers already, right? So I think that has really helped us from a customer acquisition perspective, right? Now to talk about how fast the traction is growing, right? It's growing pretty phenomenally, right? So just to tell you, just in February, we did just INR 30 lakhs or so of lending, right? And in March, that went 300% up to obviously INR 1.2 crores. And in April, it's already up to INR 3 crores. I think the traction that we are seeing here is pretty phenomenal. As you can see, it's literally month-on-month there's a 300% growth, right? And we are very, very early in terms of our build-out. But it's pretty heartening to see from a customer product fit perspective that there is a great fit. And it's good to see that there's a lot of trust already from borrowers onto our brand name because of which they are obviously trusting us to borrow from us and at the same point in time, leading to such an organic scale up with obviously 0 spend on any kind of marketing, right? All of this, right, leads me to one very important point to talk about basically what is our main focus over here in terms of how do we excel in this space, right? Like if you want to be top 1% in this space, and that's really our target, right? How do you end up becoming top 1% in the digital lending space? The answer, in our opinion, is as old as lending itself, right? But it's all about the underwriting, right? So underwriting in this space as per all the research that we've done across the 8, 9 years that we've been doing this through our partnership model, it's primarily been 3 broad approaches, right? So one has been largely a lot of manual intervention, right, where humans are actually underwriting every single application. There is obviously a lot of telecalling, which is happening to basically ensure that there's a legit customer on the other end. So that is obviously one kind of approach that you can take, and that's what's being done by some fintechs even today. Second is not so much human intervention, but more like just simple rules that you kind of apply on top of the credit bureau and the bank statement, and that will pretty much help you kind of underwrite customers. I think the approach that we are taking is more of a data science approach where our thought process is that we feel like a bureau and a person's banking is just 10% of the game, right? 90% of the game is a lot to do with device intelligence, what phone this person is using, what signals can you extract from the phone in terms of understanding a person's financial situation through his SMS as an example, trying to understand what are the other apps that basically he's interacting with and using on a more consistent basis, trying to get a lot of signals from his locations, right? One of the very interesting insights that we have is that the orders that you're placing with a Swiggy or a Zomato or an Amazon gives us a much better idea about your current address than your KYC, right? So there are a lot of these small, small, small, small things, which really are critically important if we are to serve the people who banks and the larger NBFCs are not lending to. If you -- at this point in time, apply just the credit bureau and the banking, it's not going to tell much information about this person largely because very few formal loans have been given to such people. And secondly, from a banking perspective, most of their banking is pretty weak, right, because their source of income are pretty inconsistent. And at the same point in time, one of the habits that, I would say, that strata of customers end up having is that whenever money comes into the bank account, they ideally want to withdraw it, right? Because they want to use cash in their everyday life, even today, right? So that is something which we are seeing pretty predominantly. So I think the signals that you end up using from an underwriting perspective have to be a lot more broader, right? So in our opinion, you have to get everything right. Of course, you have to get customer acquisition right. You have to get the underwriting right. You have to get the collections right. You have to get the app experience right, right? You have to do a lot of things right, right? A lot of things -- everything has to be a 7 on 10. But one place that we strongly believe that you have to be the best at, right, elite at, right, is basically underwriting, right? So that is one place that we are investing very, very heavily. And that is one place where we strongly believe that knowledge only compounds, right? Because the more data that you end up gathering, the more you can understand that how much is that particular data point important from helping us understand what is a good borrower and what is a bad borrower, right? So you have to start gathering these signals as early as possible. It isn't something, as an example that you can think of a year or 2 years from now because you've lost almost 1, 2 years of data. And any point in time, you need to use any of these signals to basically help you underwrite, they have to be statistically significant, right? You can't make very obvious assumptions in this because we've realized doing this now for barely a few months that a lot of the obvious assumptions that you will make when you're underwriting these borrowers, it may not be the best thing, right? So this is one place that we feel that you have to over-index on above all of the things that you're essentially doing. So really going back to the hundreds of years of lending, I think the rule has always been the same where the magic happens at the underwriting, right? Everything else, I feel you have to be at industry level standards and everywhere else you have to be following the gold standards. But this, we have to be significantly better than the industry, and we have to be the top 1% at, right? So that is one thing which we are kind of over-indexing on. Finally, obviously, in order for us to achieve all of the things that we have, right, like I think for us, we see this as a massive opportunity, right? Like in the 8, 9 years of us building Apollo so far, I think this is the largest opportunity that we've had to build out something which is incredibly large, right, which is, I would assume almost close to 50 to 100x of the business that we have built over the last 8, 9 years. I feel this has the potential to end up becoming 100x the size of anything we've built over the last 8, 9 years, right? That's how big I feel this opportunity is essentially. So in order to get this absolutely right, right, we have a very simple mantra when it comes to hiring. Our goal right now is to build out the leadership team, right? So far, a lot of the building that we have done with Apollo Finvest has been largely with people who have been maybe 2 to 3 years experience, and we have been getting them into the company. They've been super intelligent, super motivated, and we've coached them, and we obviously built what we could, I think, up to this point because of those people. I think in order for us to go to the levels that we want to go to 10x, 100x from now, right, we have to build in the leadership team. And this leadership team will look like people who have basically been in the digital lending space itself, at least for a period of 4 to 5 years. They've learned a lot of things that we don't want to relearn. We don't want to reinvent the wheel. We strongly believe at this point in time that we know the business model which works. We know the target audience. A lot of the direction and the vision and the execution plan, right, basically we clearly have it laid out, right? What does the next 2 years kind of look like for Apollo is a very clear path at this point in time. What we are looking for when we are hiring pretty much across our entire company is proven builders, right? People who have been in other companies, they've seen the digital lending space specifically because one of the things which we really value is that the digital lending space and especially the space that we are targeting, right, which is the smaller ticket size loans, it is an extremely nuanced space, right? The underwriting over here, the business model over here, right? The nuances that you need to know from an engineering standpoint, the scalability of the infrastructure that you have to build, the marketing messaging, which has to go out, right? Everything, the operational expertise and the excellence that you need over here is extremely high just because of the sheer volume and the amount of data that you're dealing with, right? Data pipes and the amount of data engineering that you need to do to get to the top 1% underwriting that I'm talking about, you're dealing with gigabytes of data, right, essentially. Like from one single phone, you're probably getting like 10,000-plus variables at this point in time. And all of that will help us when we are underwriting people who, at this point in time are truly underbanked, right? So one of the things which we really feel very strongly about is whenever you want to build something, right, we have to have 2 things in mind. One is we have to build something which truly big banks and big NBFCs have not cracked because that is the opportunity. And number two, the more we invest into this right now, the more of a moat it ends up building because the more data that you gather, the more insights that you get, which you cannot go back in time and get, right? In fact, like the other day we were having a discussion internally that there is no way in which the kind of knowledge and the kind of insights that you kind of get over here even if, as an example, I had to go one-on-one with another person and give them kind of insights on how do you go about building the underwriting or the entire stack for what we are doing, it's impossible for me to kind of give anybody the entire, I would say, the lending cook book over here, right? Because it is so nuanced, right, where there are every -- there are tiny, tiny rules and tiny, tiny insights that you kind of get and it's truly a business where if you don't get it right, it will cut you with 10,000 basically nice wounds, right? But that -- when we think about this problem, it gives us a lot of energy because we know that when we build something like this, it will be very, very difficult for another company to build this, right? It's like if we climb this mountain and we reach the top, we know that this will be very, very difficult for another person to basically rebuild, right, because of the data, because of the moat, because of the insights that you can only get by doing this, that is what we feel will end up becoming making the company incredibly valuable and obviously us able to deliver incredible amount of shareholder value, right? So with that, I want to kind of pause over here. And obviously, we'll open it up for questions. Thank you. Thank you very much.

Thank you so much, Mikhil and Diksha, for sharing your valuable insights about the company's performance. Now we will open the floor for questions. [Operator Instructions] All right, so host, please unmute [ Mr. Darshan Patel ].

My question is, so by the end of this financial year, how much loan book are you expecting to close for Apollo Cash?

So I think our internal target, the way it kind of looks is year 1, I would describe to you is a year of building the foundation essentially, right? A lot of the tech infrastructure that we want to build right across underwriting, marketing, collections, every aspect you can think of operations, compliance, everything, it's a year of building and learning. So our internal goal at this point in time from a disbursement standpoint is probably a total disbursements to the tune of, I think the first 1 year would be close to about INR 50-odd crores of total disbursement. I think the AUM will end up becoming maybe probably like INR 10 crores to INR 15-odd crores because the book tends to churn pretty quickly. But I think our goal is we are measuring this more by disbursements because that's the insight that we end up getting. So I think the target for first year would be around about INR 50-odd crores.

And what would be the percentage of total loan book at the end of the year for Apollo cash?

I think it would probably be on the lines of 15% to 20%.

So should we expect some fundraising plan for this financial year?

This is not something which is we are focusing on at this point in time because I think our debt to equity is super low. So we aren't really expecting any kind of external fund raise.

So just one last question. So for someone who is maybe a 25-year-old and who is looking to enter into a credit ecosystem for the first time, right, and does not have any credit history. So why would someone go to Apollo Cash and not someone like Bajaj Finance or other big guys?

I think simply put, because honestly, a company like Apollo would probably be the only option -- because if you're new to credit, essentially, it's unlikely that a large bank or an NBFC is going to give you a loan, right, very easily, an unsecured loan, I should be very specific. So in that situation, if you come to a company like Apollo as an example, it's likely that you'll end up getting a loan with us because we are not -- bureau is like 10% of our underwriting. We'll be looking for a lot more signals from your phone to decide whether you are our target customer or not. But just to be very specific over here, right, to be very honest, if I'm talking about somebody like you, if you came to our app, I'm pretty certain that you would most likely end up getting rejected because our goal isn't actually to lend to people like yourself. Our goal is to actually lend to people who are truly Bharat, right? Like a good example would be like a rickshaw driver or a help as an example, or blue-collar workers, gig workers, things like that, right? That is the TG. So if a person like you ended up coming to our app, it would most likely look to us like a fraud or a very bad credit situation because we don't expect a person like you to come to our app, right? So our TG is very -- basically very focused. So when we -- the way the credit algorithm essentially works is if we find somebody enters our ecosystem, right, we try to see is this person looking like a customer that we have seen in the past. If it doesn't look like a customer that has performed really well on our platform, it will probably look like what is a customer like you coming to take a very small ticket size loan because the rest of the profile does not match. So at that point in time, probably our algorithm will tag this as a very high-risk customer because something probably very bad has happened in your life that you have to come to a platform, which is largely catering to blue collar workers, and it's likely that you end up getting rejected.

Got it. Just a follow-up question on this one. So when you say your target audience is for Bharat, so do we have options for like different languages in Apollo Cash? Or is it primarily in English?

Actually, we -- at this point in time, our app is completely in English because we haven't actually seen a lot of friction at this point in time on that front. And actually, the way it works, interestingly enough is that if you're an Android phone, -- and let's say, as an example, you prefer having, say, Hindi as your primary language, right? So you would have set the entire language on your phone to be Hindi, right? In which case, our interface itself would end up getting converted to Hindi as well. So we haven't had to essentially do anything special at our end. Basically, depending on your OS settings, automatically, the app is built in such a way that it translates. That's number one. Number two, I think to deal with multi-language support, that's largely to do from a communication perspective. So a lot of our communication messages coming to you from a collection standpoint will be in local languages so that in case you have given us your preference, which is something that we ask you during the onboarding, if you've given us a preference, we will obviously try to communicate with you in a language of your preference.

And our next question is from [ Mr. Ronak ].

My question is regarding the future loan book. So how does the future loan book look like in terms of percentage if we split them between term loans, loans by [ RSP ] warehousing, Appollo Cash, et cetera?

Okay. So I would say that, Ronak, I think over the next, I would say, 8 months or so, right? Our goal is that probably Apollo Cash ends up becoming about 20% to 25% of our loan book at this point in time. Maybe term loans end up becoming about, let's say, 40% largely we're trying to convert a lot of our term loans into warehouse structures. And the balance ends up becoming co-lending or BC partnership kind of loans. That would be the next 8 months. And then our goal would be over the next year or so, our goal would be to make Apollo Cash be a lot more stronger and probably end up becoming 50% to 60% of our book and the rest being split again between partnerships and term loans, warehouse structures basically. But the trajectory is pretty clear that you should expect over the next 12 to 24 months that we expect the term loan structure to keep going down. We expect the Apollo cash contribution to keep going up. And in general, the retail exposure either by Apollo Cash or through partnerships should end up becoming the vast majority. It's already 51%, but we expect that number to keep going higher and higher and the warehousing and the term loan structures to keep reducing as a function.

We'll take up our next question, and it is from [ Mr. Pajval ].

So I was going through the financials. And is there any reason for reduction in the impairment on loan charges year-on-year?

Yes. I think this is a function of basically term loans. So in general, Diksha you can correct me if I'm wrong. This is the structure, right?

Yes, sure. You want me to take over, or?

Yes, please.

Okay. So basically, the book that you see in our financials primarily consists of our term loans and -- well, thankfully because term loans perform better and the provisioning norms are very different as compared to retail book, which is of a shorter tenure and it involves a higher delinquency rate as compared to a term loan. The provisioning that we do for term loans is a lot more conservative. And because the previous year's book primarily comprised of term loans, the impairment numbers are lower. But of course, as our retail book picks up, this trend will also change.

We'll take up our next question, and it is from [ Mr. Chinmay ].

So the [ AP Cash ] product looks promising. So with respect to that, I just wanted to know what measures are being taken to retain customers?

Sorry, can you repeat the last part?

Yes. What measures are being taken to retain customers for AP Cash?

Got it. Yes. I think that's a good question, right? I think, see, largely, what ends up happening is from a customer perspective is a lot of focus of ours is actually on retention, right? So I think largely retention is a function of 2 things. One is we try and improve the pricing essentially for the customer. So once they basically come on to our platform, show that they are a good customer, making repayments on time, we basically try and essentially next time when they come to our platform, reduce the pricing for them. I think secondly, also, we slowly increase the amount of loan that we are basically making available from them from an amount perspective, right? So essentially, it's a trust game, right? The more essentially they show that they are paying us on time, the more we increase basically the offer that we are giving them and while decreasing the charges, right? So this ends up becoming a great value proposition for them because the longer they are on our platform and the more trust that they establish from us, the larger loan amount they can get from us for a longer duration and at the same point in time, get a loan for cheaper ROI and processing fee essentially, right? So this is the 3-prong way in which we kind of think about retaining customers as well. And obviously, last thing, essentially, whenever they come back, the good thing essentially for them is, I think for a first-time customer, the number of screens that they have to probably go through is probably more than 10-plus screens, right? But for a returning customer, I think they have to make probably 3 clicks in order to get a loan, right? So I think the user experience becomes amazing pretty much, right? Like in 3 clicks and under 5 seconds, you can end up getting a loan again. So that's pretty powerful.

And it appears that we have addressed all the questions for today. If anybody has any further queries, please reach out to us by writing to us on [email protected], and our team will be happy to assist you. Thank you so much, everyone, for joining us today and for your continued support and interest in Apollo's journey. Have a great day. Thank you.

Thank you. Can we conclude the meeting?

Yes, host, we can conclude the meeting.

Thank you.