Founded by Ebenezer Daniel in 2014 and backed by Ashvin Chadha, former investment banker at Morgan Stanley, Orange Retail Finance serves semi-urban and rural customers across Tamil Nadu, Andhra Pradesh, Karnataka and Telangana through 58 branches. Its products include loan against property for Micro, Small and Medium Enterprises and gold loans.
Interestingly, Orange Retail began its journey by extending two-wheeler loans, a portfolio which it is scaling down and moving towards secured retail lending like gold loans and loans against property. “During covid, we faced issues with the two-wheeler portfolio in terms of tracking borrower repayments and recovery. As the segment by nature involves greater risk, we decided to include more secured products,” says Saravanan Kandan, Chief Financial Officer.
Transition to secure lending
The company has also brought in a new leadership team to steer this transition. Its chief financial officer, chief risk officer and chief business & operations officer all have joined over the past year, bringing decades of combined banking and NBFC experience. This team has also strengthened the company’s liquidity position, raising close to Rs 200 crore in debt over the last two months.
In 2021, the company entered loan against property portfolio and scaled it up in 2023. It forayed into gold loans a year back. The company’s current loan book stands at Rs 410 crore, with loans against property reaching Rs 250 crore. The two wheeler portfolio will touch Rs 90 crore by the end of FY27 and will run down completely by FY28. This reduced non-performing assets to 2.1 per cent from 9.3 per cent as of March 2024 while capital adequacy ratio stands at 34 per cent.
Betting on gold loans
Orange Retail has signed a co-lending agreement with Shriram Finance to offer gold loans to customers across Tamil Nadu. Under the agreement, the two companies will jointly originate and fund gold loans secured against gold jewellery, with a 20:80 participation ratio between Orange and Shriram Finance, respectively. The programme has a total cap of Rs 100 crore. “The company has 2.6 lakh customers and knows the borrowing profile well,” notes Saravanan. With Reserve Bank of India increasing interest rates, there will be a shift to gold loans from personal loans too.
As part of its five-year roadmap, Orange Retail aims to scale its Asssets Under Management (AUM) to Rs 3000 crore by FY31 from the targeted Rs 550 crore in FY27. Gold loans are expected to account a substantial share, alongside MSME loan against property. Women currently account for 35 per cent of borrower base and Orange intends to double it. In FY31, the company also looks to go public.